Waipereira Investments Limited v Ivil [2014] NZHC 546 (21 March 2014)

Last Updated: 31 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-5004 [2014] NZHC 546

UNDER Section 42 of the Insolvency Act 2006

IN THE MATTER of Bankruptcy of BRENT ALEXANDER IVIL

BETWEEN WAIPEREIRA INVESTMENTS LIMITED

Judgment Creditor

AND Bankruptcy of BRENT ALEXANDER IVIL

Judgment Debtor

Hearing: 21 March 2014

Appearances: TJG Allan for Applicant

Respondent in person

Judgment: 21 March 2014

_{ORAL JUDGMENT OF TOOGOOD J}

WAIPEREIRA INVESTMENTS LIMITED v IVIL [2014] NZHC 546 [21 March 2014]

[1] Waipereira Investments Ltd (“Waipereira”), the judgment creditor, seeks an order for adjudication of bankruptcy in respect of the judgment debtor, Mr Brent Alexander Ivil.

[2] Mr Ivil opposes the application. He raises three technical points concerning the bankruptcy notice served on him and the application for adjudication; and he also requests the Court to exercise its discretion under s 42 of the Insolvency Act 2006 (“the Act”) to halt or refuse to grant the application while he appeals the judgment underlying the bankruptcy notice.

Background facts

[3] I deal first with the background facts which concern a claim by Waipereira for summary judgment to enforce a guarantee entered into by Mr Ivil. On

19 November 2013, Associate Judge Doogue issued a judgment¹ in which he

described his findings about the factual background in these terms [footnotes omitted]:

[1] In May 2007 the plaintiff advanced to West Harbour Holdings Limited (“WHHL”) amounts which totalled $2,492,782 after principal, interest and charges were added, secured by a mortgage over townhouses situated at West Harbour Marina. Waipareira took a first mortgage security over those townhouses. The defendant is the sole director of WHHL.

[2] In May 2008 the plaintiff also entered into a joint venture agreement with WHHL for the development of an apartment complex. Pursuant to the joint venture a company called Marina Resort Limited was incorporated in which the two entities owned 50% of the shares. The joint venture proposal was intended to result in the development of apartment units and the subsequent further addition of a hotel. While the location of the joint venture development was at the same place as the properties that were subject to the mortgage security, Clearwater Cove, the latter properties were not part of the intended joint venture development. The joint venture arrangement was the subject of later notices of cancellation on both sides. The property which was to be developed pursuant to the joint venture was known as Marina Resort.

[3] Some of the 16 existing apartments that were to be acquired for the joint venture were owned by Mr Ivil who was associated with WHHL. Three of the properties were however owned by third parties who were not parties to the joint venture heads of agreement.

¹ Waipareira Investments Ltd v Ivil [2013] NZHC 3048.

[4] A key part of the joint venture was that the plaintiff and WHHL agreed between themselves that the plaintiff was to make an initial contribution of approximately $2 million.

[5] The effect of the parties’ arrangements was that the plaintiff would relinquish its security over the townhouses and receive in return a credit for approximately $2 million in the accounts of the joint venture.

[6] The details of the capitalisation process which the defendant puts forward as part of its defence in the present proceedings are taken from the judgment of Woodhouse J. In that proceeding, WHHL applied for an order that the mortgage be discharged. Various affidavits and evidence which the parties filed in those proceedings together with the judgment itself have been adduced as part of the defendant’s evidence in the current proceeding. Mr Allan described this material as “hearsay”. Because the judgment that Woodhouse J gave in the proceedings does not give rise to an estoppel as between the parties - it being an application for summary judgment that he gave judgment on - I consider that in the absence of evidence which demonstrates error, the account of matters set out in that judgment should, as a matter of commonsense, be taken as an accurate account of the basic characteristics of the joint venture arrangement for the purposes of this judgment.

[7] Woodhouse J concluded that the conveyances necessary to give effect to the joint venture, including the transfer of properties to Marina Resort, had not occurred. Nor had a re-financing to clear the mortgages of the properties which were to be transferred into the joint venture vehicle, Marina Resort, occurred.

[8] Purportedly because of the lack of progress in settling the transfer of properties to Marina Resort, the plaintiff gave notice of termination of the joint venture agreement 24 February 2011. This was not accepted by WHHL. WHHL elected to treat the notice from the plaintiff as constituting a wrongful repudiation of the contractual arrangements and to treat the obligations under the joint venture as still being binding on the parties. WHHL has since notified the plaintiff of the requirement that the plaintiff give discharges of the mortgages which secured the original advances. The plaintiff declined to do so.

[9] The judgment which Woodhouse J gave contained the conclusion that WHHL had not been able to establish that the plaintiff, Waipareira, had no arguable defence. The justification for this conclusion was that it was reasonably arguable that WHHL was not ready willing and able to settle on its obligations arising from the joint venture agreement and therefore could not require the plaintiff, Waipareira, to provide a discharge of the mortgages. The conclusions which the Judge came to are not, of course, binding on the parties in the present proceeding.

[10] The above events are not directly the subject of the summary judgment application which is now before the Court but they are mentioned because they provide the factual context in which the matters with which the Court is now concerned took place.

[11] In this proceeding, the plaintiff seeks summary judgment for

$1,311,997 together with interest at the rate of 20.7% from 18 March 2013

until the date payment is made, and costs on a solicitor/client basis. This sum is allegedly owed by WHHL under a Term Loan Agreement dated 12

November 2010 (“the apartment loan”). This was a separate agreement from

the earlier joint-venture agreement. It is alleged that the plaintiff loaned

$640,000 to WHHL which became overdue after 12 November 2011, attracting interest at a rate of 20.7%. On 18 May 2007, the defendant had guaranteed payment of WHHL’s present and future indebtedness to the plaintiff, this guarantee covering the Term Loan Agreement. WHHL was placed in liquidation on 4 March 2013. The plaintiff has demanded payment from the defendant who has refused to pay. The plaintiff seeks to enforce its guarantee against the defendant. The defendant opposes summary judgment, arguing that he has a defence to the plaintiff’s claim so that r 12.2(1) HCR is not satisfied.

[4] After discussing the merits of the parties’ positions, the Judge concluded that

Mr Ivil had no defences to the plaintiff’s claim and gave summary judgment for

$994,895 together with interest and costs.

[5] On 5 December 2013, Waipereira served on Mr Ivil a bankruptcy notice (“the notice”) claiming a total of $1,139,337.88 (that sum being the judgment debt plus interest) and costs.

[6] On 16 December 2013, Mr Ivil filed a notice of appeal against the summary judgment. The appeal has not yet been heard. It is not disputed that Mr Ivil has not satisfied the judgment debt. Prima facie, therefore, the judgment creditor is justified in making this application.

Mr Ivil’s submissions

[7] Mr Ivil opposes the adjudication application on four grounds.

Form of bankruptcy notice

[8] First, he submits that the bankruptcy notice served on him was invalid because it departs from the prescribed statutory form by omitting the word “or” in the statement of his obligations in response to the Notice between the first two paragraphs.

[9] Looked at strictly on its face, the Notice which was addressed to Mr Ivil said that within 10 working days of receipt:

... you must pay to the judgment creditor, WAIPAREIRA INVESTMENTS LTD, $1,139,337.88...:-

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; or

you must satisfy the High Court that you have a counterclaim....

[10] When a creditor has obtained a final judgment or order against a debtor for a specified amount, the creditor may request the Registrar of the High Court to issue a bankruptcy notice.² If the debtor fails to comply with the requirements of the notice within 10 working days of the date of service, the debtor has committed an act of bankruptcy.³

[11] The notice must be in Form B2 of schedule 1 of the High Court Rules.⁴

Some departures from the prescribed form will render a bankruptcy notice invalid and the defect not rectifiable. For example, in Re Boddie, ex parte Amburys Ltd,⁵ the omission of the words “or you must secure or compound for the said sum to the satisfaction of the Court” was held to be such a defect.

[12] In this case, however, I accept that no reasonable person could interpret the bankruptcy notice as meaning Mr Ivil had to comply with both of paragraphs 1(a) and 1(b); they are inconsistent with each other and plainly alternatives. The omission of the single word “or” is immaterial and does not invalidate the notice.

Form of application

[13] There is another typographical error which is relied upon by Mr Ivil as his second ground. A creditor’s application for adjudication in bankruptcy must be in Form B3 of schedule 1 to the High Court Rules.⁶ Mr Ivil submits that the form requires the application to be signed by the applicant creditor or on its behalf. He says that the application as filed is defective because it was signed by

_{Mr John Tamihere on behalf of “Waipereira Investments” (which is not a legal}

² _{Insolvency Act 2006, s 17(1) and High Court Rules, r 24.8.}

³ _{Insolvency Act 2006, s 17(1)(d) and (4)(a).}

⁴ _{Insolvency Act 2006, s 29(1)(a) and High Court Rules, r 24.8(3).}

⁵ _{Re Boddie, ex parte Amburys Ltd [1933] NZLR 1012 (SC).}

⁶ High Court Rules, r 24.11.

entity) and not on behalf of the incorporated company, Waipereira Investments Limited. However, it is clear from the entituling and the form of the application that the word “Limited” was inadvertently omitted from the jurat, or that part of the document where the circumstances of Mr Tamihere’s signature were set out and that Mr Tamihere was signing the application on behalf of the judgment creditor.

Failure to verify application

[14] A creditor’s application to have a debtor adjudicated bankrupt must be verified by affidavit of the creditor or of some person having knowledge of the facts.⁷ Mr Ivil submits as his third ground that the application filed in this case is defective because the supporting affidavit sworn by Mr Tamihere contains no mention of his being authorised by Waipereira to make the affidavit. Mr Tamihere states in the affidavit that he has knowledge of the facts relating to the application. In doing so he was following the prescribed form and the affidavit meets the requirements of the Rules. There is no merit in this point either.

Application under s 42 of the Insolvency Act 2006 to halt or refuse when judgment being appealed

[15] The only substantive ground of opposition raised by Mr Ivil is an application to the Court to halt or refuse the adjudication under s 42 of the Insolvency Act 2006. Under that section, the Court has a wide discretion to halt or refuse an application for adjudication where the application is based on non-compliance with a bankruptcy notice, as here, if the debtor has appealed against the judgment underlying the

bankruptcy notice and the appeal is still to be decided.⁸ Mr Ivil filed notice of such

an appeal on 16 December 2013 and has paid security for costs but it seems that no other formal steps have been taken to advance the appeal to date.

[16] Several High Court judgments have set out the considerations that might be relevant to the exercise of the Court’s discretion under s 42.⁹ Overall, the discretion

⁷ _{High Court Rules, r 24.12.}

⁸ _{Insolvency Act 2006, s 42.}

⁹ See Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV-2009-404-4175, 3 December

2009 at [10]-[11]; Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121,

is one “that the Court should exercise in a manner that is just and equitable having

regard to all relevant factors”.¹⁰

[17] Waipereira submits that the following factors, taken from the case law, are relevant to the Court’s decision on this application:¹¹

(a) The prejudice to Mr Ivil if his s 42 application is refused. (b) The likelihood of success of his appeal.

(c) His ability to pay the debt if his appeal does not succeed in extinguishing it.

(d) His bona fides in prosecuting the appeal.

(e) The public interest in adjudicating Mr Ivil bankrupt.

Prejudice to Mr Ivil

[18] In respect of the first factor, it is necessary to consider whether refusing the s 42 application will render Mr Ivil’s appeal nugatory or worthless. This involves a consideration of whether, if Mr Ivil is adjudicated bankrupt, the Official Assignee will permit him to continue with his appeal.¹² The risk that the Official Assignee will not do so is not determinative¹³ but such a risk is a factor favouring refusal of the application.¹⁴ Waipereira submits that the Official Assignee is very likely to allow the appeal to continue as, despite having no assets and no income, Mr Ivil has found the resources to pay security for costs. This suggests, it is submitted, that

_{creditors will not be prejudiced by allowing the appeal to continue. Mr Ivil has not}

_{4 November 2010 at [14].}

10. Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010 at [10].
11. Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010 at [14].

¹² Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010

_{at [16].}

13. Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010 at [17].
14. Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010 at [18].

persuaded me that the appeal will necessarily be abandoned if he is adjudicated bankrupt. And steps can be taken under s 414 of the Act to rescind an adjudication if the appeal is successful.

Likelihood of a successful appeal

[19] The Court must be cautious when considering the next factor, which is the likelihood of a successful appeal. It should only hold this issue to be a relevant factor when it can predict that the appeal has absolutely no chance of success or when the Court concludes that it has a very high prospect of success.¹⁵ In this case, the grounds set out in Mr Ivil’s notice of appeal are identical to those he put before Associate Judge Doogue at the summary judgment hearing.¹⁶ In a thorough, fully- reasoned decision Judge Doogue explained why Mr Ivil had not shown any arguable defences to Waipereira’s claim. The notice of appeal contains no analysis of the judgment so as to identify any error on the part of the Judge. Mr Ivil says that he has arranged for two barristers to consider the judgment and give him advice, but they have not yet completed that exercise.

[20] There is only one new ground added to those which were drawn from the opposition to the summary judgment application . Mr Ivil says that summary judgment should not have been given for Waipereira because the Judge’s said in the conclusion of his judgment, at [91] that:

It is arguable that the plaintiff is seeking to enforce its guarantee in an oppressive manner.

[21] It is clear that was not what the Judge intended to say. The line in the conclusion follows a statement at [90] that Mr Ivil “does not have any arguable defences”.¹⁷ Moreover, Mr Ivil’s arguments as to oppression are discussed carefully

at [55]-[60] of the judgment. The Judge finished the discussion by saying:¹⁸

There is no basis upon which the Court could conclude that the defendant has an arguable defence under this head.

15. Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV-2010-419-121, 4 November 2010 at [20].

¹⁶ _{Waipareira Investments Ltd v Ivil, above n 1, at [14].}

¹⁷ _{At [90].}

¹⁸ At [60].

[22] It is clear, therefore, that the Judge intended to say at [90] that “It is not arguable that the plaintiff is seeking to enforce its guarantee in an oppressive manner.”

[23] Mr Ivil argues that the debt upon which the summary judgment was based represents only a small part of a complex web of commercial arrangements between Waipereira and other entities, including those with which he is associated and he regards the appeal and other litigation which is currently on foot as providing the only proper basis to assess where the merits lie. I am not concerned with those other cases, however, and the Associate Judge properly addressed the merits of the guarantee and the enforcement of it.

Ability to pay the debt

[24] The Court must consider what assets Mr Ivil has to pay this debt if his appeal does not succeed in extinguishing it, but Mr Ivil has provided no basis for a finding that he will be able to pay the judgment debt if his appeal fails. In reaching that view, I do not need to rely on statements by Ms Wu concerning Mr Ivil’s financial position. Mr Ivil’s affidavits sworn in other proceedings indicate that he relies on trusts and other entities for financial support and has no personal assets nor any personal income to speak of.

Bona fides in prosecuting an appeal

[25] Waipereira submits that the timing of Mr Ivil’s notice of appeal suggests his only purpose was to defer the adjudication process, and that he has done nothing to advance the appeal other than paying security for costs. I am not prepared to go so far as making a finding to that effect and accept that there may be factual and legal issues which Mr Ivil genuinely wants the courts to address, concerning the wider arrangements about the property development which has led to this proceeding. However, that does not justify preventing or delaying Waipereira from exercising its rights consequent upon the establishment of the judgment debt.

Public interest

[26] Waipereira submits that there is a public interest in adjudicating Mr Ivil bankrupt because he is unreliable and untruthful in his business dealings. There certainly appear in other judgments of this Court and other adjudicative bodies suggestions that Mr Ivil has been unreliable and untruthful in evidence which he has given but I do not propose to add to them here because I am not sufficiently informed to that extent. However, there is nothing in the evidence which Mr Ivil has put forward to persuade me that the public will benefit from Mr Ivil avoiding bankruptcy at this point.

Decision

[27] For these reasons, I am satisfied that the judgment creditor has made out its grounds for adjudication and that the Court should not exercise its discretion to halt or refuse an order.

[28] Accordingly, I make an order adjudicating Brent Alexander Ivil bankrupt.

[29] The order for adjudication for bankruptcy which I have just made was timed at 2:33 pm.

Costs

[30] The applicant shall have costs on a Category 1B basis and disbursements as fixed by the Registrar.

...................................

Toogood J