Indiana Publications (NZ) Limited v Prasad HC Auckland CIV ,2010-404-3333 [2010] NZHC 1850 (11 October 2010)

Last Updated: 24 October 2010

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2010-404-003333}

IN THE MATTER OF Section 13 of the Insolvency Act 2006

BETWEEN INDIANA PUBLICATIONS (NZ) LIMITED

Judgment Creditor

AND RAJENDRA PRASAD Judgment Debtor

Hearing: 8 October 2010

Counsel: GM Harrison for judgment creditor Appearance: R Prasad, judgment debtor in person Judgment: 11 October 2010 at 11:30

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for an adjudication order]

Solicitors: Parshotam & Co, PO Box 27 079, Auckland

_{And To: R Prasad, 3 Mono Place, Ellerslie}

INDIANA PUBLICATIONS (NZ) LTD V PRASAD HC AK CIV 2010-404-003333 11 October 2010

[1] The judgment creditor applies for an order adjudicating Rajendra Prasad a bankrupt.

[2] The judgment creditor has obtained a number of judgments against Mr Prasad. They are recorded in paragraph 2(b) of the application for an adjudication order and total $46,709.00. Further orders of the High Court have been made in favour of the judgment creditor against the judgment debtor being:

a) An order of Associate Judge Bell on 27 July 2010 in the sum of

$3,008; and

b) An order of Justice Cooper on 23 August 2010 in the sum of

$9,700.00.

The amount due under the judgments, without taking into account interest, is

$59,417.00.

[3] The judgment creditor requested a bankruptcy notice be issued. A bankruptcy notice was issued. The judgment debtor raised an issue concerning service of it, which was dealt with by Associate Judge Bell. As a result of Associate Judge Bell’s judgment the judgment debtor had until 2 August to satisfy the bankruptcy notice. He did not. Accordingly, as at 3 August 2010 the judgment debtor committed an act of bankruptcy.

[4] The judgment creditor filed an application for an adjudication order. The judgment debtor appeared at the first call of the application on 16 September 2010. The judgment debtor had, on 14 September 2010, filed a notice of opposition to the adjudication application. Associate Judge Doogue adjourned the application for a defended fixture.

[5] The judgment debtor, in his notice of opposition, recounted a series of steps and court decisions involving a dispute with the judgment creditor. Mr Harrison has correctly, in my view, identified what are the three grounds advanced by the judgment debtor in opposition to the application for adjudication.

[6] The first ground asserts that an application for an adjudication order may rely on one debt or one judgment only. No authority is given for that proposition. Nor can I find any proper basis for it. It may well be that the judgment debtor, in this case, confuses the position which arises in respect of a bankruptcy notice. Bankruptcy notices are dealt with in Part 24, Subpart 3 of the High Court Rules. It has long been held that a bankruptcy notice can be issued in respect of only one

judgment: re Low,[1] Carlyle v McCardle Richardson.[2] The reason for that is that a

debtor can choose which notice he will satisfy or raise a counterclaim, set-off or cross-demand to extinguish the notice. That is a debtor’s choice not a creditor’s choice. However, once a bankruptcy notice is issued and is not complied with, an act of bankruptcy is committed giving rise to the ability of a creditor to apply, within

three months of that act of bankruptcy, for an order of adjudication.[3] Accordingly,

the first ground in opposition cannot be sustained.

[7] The second ground was dealt with extensively by Mr Prasad in his submissions. There is no need for me to examine those submissions in depth because what was involved in Mr Prasad’s submissions was an attack on the very judgments that had been entered by this court. Judgments may be challenged, in appropriate cases, by appeal, applications for rehearing or recall. They are not matters, however, that can be the subject of review in an application for an adjudication order. To allow this would be to allow a collateral attack upon the final decision where the parties have already had a full opportunity of contesting the decision in the court by which the judgment was made: Hunter v Chief Constable of

West Midlands Police.[4]

[8] The third ground calls for the judgment creditor’s counsel to submit all invoices which were the basis for the judgment for costs. It faces the same objection that I have referred to when dealing with the second ground. There is no justification for my opening up matters that have been the subject of a court order.

[9] The judgment debtor drew attention to the fact that he had lodged an appeal against the judgment which is the foundation for the bankruptcy notice. His application for leave to appeal that judgment was declined by Justice Wylie. No further application pursuant to r 12 of the High Court Rules has been made. Nor can I see, in this case, any justification for making an order pursuant to the Insolvency Act 2006, s 42. Suffice to say, I have considered matters which were summarised in

re Pillay ex parte ANZ National Bank Ltd.[5]

[10] I have also considered the fact that there is a challenge to Associate Judge Bell’s judgment dealing with the bankruptcy notice. I do not consider that there is any justification for ordering a stay on general principles in respect of that judgment either.

[11] The jurisdictional requirements which must be met before an order of adjudication is made are contained in the Insolvency Act 2006, ss 13 and 36. Section 13 provides:

13 When creditor may apply for debtor's adjudication

A creditor may apply for a debtor to be adjudicated bankrupt if—

(a) the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and

(b) the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and

(c) the debt is a certain amount; and

(d) the debt is payable either immediately or at a date in the future that is certain

Section 36 provides:

36. Court may adjudicate debtor bankrupt

The Court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13.

[12] The jurisdictional requirements are met in this case.

[13] I must now consider the Insolvency Act 2006, s 37. Section 37 provides:

37. Court may refuse adjudication

The Court may, at its discretion, refuse to adjudicate the debtor bankrupt if—

(a) the applicant creditor has not established the requirements set out in section 13; or

(b) the debtor is able to pay his or her debts; or

(c) it is just and equitable that the Court does not make an order of adjudication; or

(d) for any other reason an order of adjudication should not be made.

[14] In Eide v Colonial Mutual Life Assurance Society[6] the general principles involved in the exercise of the discretion under the Insolvency Act 1967, s 26 (which is now the Insolvency Act 2006, s 37) were summarised and the following important matters were noted:

1) “A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made.” McHardy v Wilkins & Davies Marinas Ltd (Court of Appeal, Wellington, CA 54/93, 7 April 1993) at p 3.

2) “. . . in the exercise of the discretion under s 26 it is proper for the Court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

3) In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public.” Re Nisbett, ex parte Vala [1934] GLR 553 at p 556.

4) “. . . on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. . . . The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.” Re Fidow [1989] 2 NZLR 431 at p 444.

5) Absence of assets is a factor but:

“. . . even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be

such that the debtor ought in the public interest to be visited with the disqualifications that go with bankruptcy.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

6) Another matter:

“. . . is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.” Re Fidow (supra) at p 444.

7) There is a need:

“. . . for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made”. McHardy v Wilkins & Davies Marinas Ltd (supra) at p 4.

[15] But for one matter, I am satisfied that there are no discretionary matters which would justify refusing to exercise the discretion to adjudicate the judgment debtor in this case. The one matter, however, that I raised in the course of argument with the judgment debtor was whether he was in a position to pay the judgment in favour of the judgment creditor. He assured me that if he was allowed a period of

21 days he could make such payment. The sums due in the judgments attached to the judgment creditor’s affidavits in support total $59,417.00. I announced in open court that I would allow an adjournment to allow payment to be made in cleared funds before the adjourned date of hearing.

[16] Accordingly, I adjourn this proceeding to 10am on 29 October 2010. If in fact the sum of $59,417.00 has not been paid to the judgment creditor in clear funds before that time, the judgment debtor can expect that an order of adjudication will be made. If, however, that sum is paid there is still a risk to the judgment debtor that an order of substitution would be made in favour of the Crown which has a judgment against the judgment debtor for $13,227.07. That arises from the judgment of Justice Cooper of 23 August 2010 and sealed on 9 September 2010. An order for substitution may be made in appropriate circumstances pursuant to the Insolvency Act 2006, s 44.

Costs

[17] Although I have not yet made an order of adjudication, the justification for the application is well made out. This case has been adjourned simply as an indulgence to the judgment debtor to give him the opportunity to pay the debts if he can. In the circumstances, the judgment creditor is entitled to costs on this adjudication proceeding based on Category 2 Band B but excluding the matters which are covered by the order for costs arising from the judgment of Associate

_{Judge Bell of 27 July 2010. I so order.}

JA Faire
Associate Judge

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[1] _{re Low [1891] 1 QB 148.}
[2] _{Carlyle v McCardle Richardson HC Wellington B394/96, 12 March 1997.}
[3] _{Insolvency Act 2006, s 13(b).}
[4] Hunter v Chief Constable of West Midlands Police [1981] UKHL 13; [1982] AC 529 at 541; [1981] 3 All ER 727 (HL).

[5] Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV 2009-404-4175, 3 December 2009.

[6] Eide v Colonial Mutual Life Assurance Society Limited [1998] 3 NZLR 632 at 635.