Erwood v Maxted, Maxted and Glasgow as Trustees of the Estate of Erwood & another [2009] NZCA 19 (17 February 2009)

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Erwood v Maxted, Maxted and Glasgow as Trustees of the Estate of Erwood & another [2009] NZCA 19 (17 February 2009)

Last Updated: 2 March 2009

IN THE COURT OF APPEAL OF NEW ZEALAND

CA567/07CA631/07CA545/2008

[2009] NZCA 19

BETWEEN ROBERT JOHN ERWOOD
Appellant

AND JANET MAXTED AND JANET MAXTED AND ALEXANDER JAMES JEREMY GLASGOW AS TRUSTEES OF THE ESTATE OF EDWARD ERWOOD OF NELSON
First Respondents

AND THE OFFICIAL ASSIGNEE
Second Respondent

Hearing: 17 February 2009

Court: William Young P, Hammond and Robertson JJ

Counsel: R J Erwood by video link
C R Carruthers QC for Mrs Harley and First Respondents
P R W Chisnall for Official Assignee
N Levy as amicus curiae

Judgment: 17 February 2009 at 5.30 pm

JUDGMENT OF THE COURT

1. The stays on public advertising and the calling of creditors’ meeting are lifted.
2. The application for a stay pending appeal to the Supreme Court is dismissed.

100. Costs are reserved.

____________________________________________________________________

REASONS OF THE COURT

(Given by William Young P)

[1] At the end of the hearing this morning we lifted the stays on advertising and the calling of creditors’ meetings. We said we would give our reasons later. We also rejected an application by Mr Erwood for stays pending appeal to the Supreme Court. We now give our reasons.
[2] This and related appeals have had a turgid history which is reviewed in our judgment delivered on 23 December 2008, Erwood v Maxted [2008] NZCA 571 – a judgment which concluded in this way:

[8] Accordingly:

(a) The proceedings are to be called on 17 February 2009, pending which the stay on public advertising is to remain in place.
(b) If the creditors have been paid (or are satisfied with arrangements for resolution of any remaining dispute and payment) by that time, the bankruptcy will be annulled.
(c) If not, the remaining applications will be adjourned for a fixture but on the basis that the stay will be lifted.
(d) We reserve all questions of costs.
[3] Mr Erwood has not ensured that his creditors have been paid and in practical terms has taken no steps towards providing security. Instead, he has filed a number of documents in the Court which are full of complaint about the processes which have been followed to date, including challenges to the composition of the bench – challenges which we reject as groundless.
[4] The Official Assignee has collected or identified cash assets in excess of $900,000 which apparently belong to Mr Erwood, albeit that ostensibly they are owned by “Robert Wood”. The value of the assets collected far exceeds any likely exposure to creditors. Mr Erwood’s intransigence in relation to Mrs Maxted (who has not yet been paid) thus precipitated a bankruptcy which was eminently avoidable. Throughout he has chosen to insist on what he sees as his rights and has failed to recognise that other participants in this dispute also have rights. In that context, his failure to pick up the option which was left to him in the judgment of 23 December 2008 was unsurprising.
[5] Mr Erwood would like the status quo to remain (ie the stays) while the outstanding proceedings in this Court are heard and his dispute with another creditor, Mrs Harley, is resolved in the High Court. He sought an adjournment on the basis of the imminence of the hearing in the High Court in relation to what, if anything, he owes Mrs Harley and difficulties he says that he has had as a result of not getting a copy of our 23 December judgment until about two weeks ago.
[6] We rejected the application for an adjournment. The options open to him as set out in the 23 December judgment were perfectly clear.
[7] The appeal (CA545/2008) against the annulment decision of Associate Judge Christiansen in Maxted v Erwood HC NEL CIV 2007-442-000331 21 February 2008 is now abandoned because no steps were taken to prosecute it. Mr Erwood sees this as the fault of Ms Levy who, at the hearing this morning, was inclined to accept that Mr Erwood might fairly have expected her to attend to the logistics of the appeal, including preparation of the case on appeal (this given what was said in [44] of the judgment of 30 May 2008, Erwood v Maxted [2008] NZCA 139). Be that as it may, the appeal is now undoubtedly at an end and if Mr Erwood wishes to challenge the annulment judgment, he would have to file a further appeal (and obtain leave to do so out of time). On the argument of Mr Carruthers QC, this leaves the annulment judgment of Associate Judge Christiansen in place, a decision which in his submission means that the recall application is effectively superseded by events. We are not sure that this is necessarily right. On the other hand, it is fair to say that we do not see much merit in either the recall application or the appeals which were struck out.
[8] The annulment order was made on terms which required payment of specific sums to the two creditors who had then filed proofs of debts, as well as costs in favour of the petitioning creditor and the Official Assignee. It recorded that the order was not to be sealed until confirmation was received that the required payments have been made. This has not happened. There are a number of reasons for this, most relevantly Mr Erwood’s challenge to Mrs Harley’s proof of debt and Mr Erwood’s now abandoned appeal against the judgment. Given that the challenge to Mrs Harley’s proof of debt is being addressed in the statutory context of Mr Erwood’s bankruptcy, we think it clear that the bankruptcy remains in place and that the annulment will not take effect unless and until all payments required under it are made.
[9] There are other aspects of the situation which trouble us. When these proceedings were last before the Court, we told in effect that we could short circuit the statutory bankruptcy procedures on the basis that there were no creditors other than Mrs Maxted and Mrs Harley. But two more creditors have emerged with claims of around $100,000. On the basis of the material before us, it seems that Mr Erwood has chosen to hold assets under an alias. The extent of the assets that he apparently owns might come as something of a surprise to those who have been dealing with him. This rather suggests that the public interest now requires the orderly processing of the bankruptcy so that any other creditors can be identified.
[10] In the course of this morning’s hearing, we tried to ascertain Mr Erwood’s stance as to whether he claims to own the money which the Official Assignee has collected and, if so, why this money was held under an alias. He declined to go into these issues as they are apparently relevant to fraud charges which we understand to have been laid in December 2008. We also endeavoured to ascertain the basis of his objection to providing security for the claims against him. Initially he did not provide much in the way of reasons. Towards the end of the hearing, he, however, offered to provide security for the claims of Mrs Maxted and Mrs Harley by paying the money into Court. It is clear that he had in mind a figure of around $220,000, representing approximately what is said to be owed to Mrs Maxted and Mrs Harley. To a suggestion that $500,000 should be paid into Court to cover all possible claims (ie those of Mrs Maxted, Mrs Harley, the two new creditors who have surfaced with claims of around $100,000, any other claims and interest and costs) Mr Erwood complained that this went significantly beyond the terms of the annulment order and also what was indicated in our 23 December 2008 judgment. The problem with this stance is that the situation has moved on since both the annulment order and when the case was before us in September last year. Most relevantly, more proofs of debt have been filed. On the basis of the material before us, Mr Erwood has held money under an alias and he has undoubtedly given at least Mrs Maxted the run-around over the money he owes her. He might be thought to be a not very reliable debtor. The two additional creditors would have every cause for complaint if the bankruptcy was annulled without protection for them. And given that those creditors came out of the woodwork despite what was indicated to us last September, we have no basis for assuming that public advertising would not produce other creditors. We have to deal with the situation as it now stands and we must respect the rights and legitimate expectations of all of Mr Erwood’s creditors.
[11] In those circumstances we were left with the view that the bankruptcy must now proceed in accordance with the statutory procedure. These are the reasons why the stays on publication and the calling of creditors meetings were lifted.
[12] At the end of the hearing Mr Erwood sought a stay pending an appeal to the Supreme Court, presumably an appeal against our decision to lift the stays. We saw no merit in the application which, if successful, would further disrupt the orderly processing of the bankruptcy and could, in conjunction with the terms of the annulment order made by Associate Judge Christiansen, have the potential to seriously prejudice the position of the two new creditors and any unknown creditors who might respond to public advertising.
[13] We note as a post-script that the Official Assignee, the two new creditors and any other creditors who surface as a result of public advertising may well wish to consider whether the terms of the annulment judgment remain appropriate, given that it appears to have been predicated on the assumption that the only relevant creditors are Mrs Maxted and Mrs Harley – an assumption which may well not be true.

Solicitors:
Russell McVeagh, Wellington for Mrs Harley and First Respondents
Gibson Sheat, Wellington for Second Respondent