Southern Cross Enterprises Limited (in receivership and in liquidation) v Hettig [2015] NZHC 1432 (18 June 2015)

Last Updated: 1 July 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-301 [2015] NZHC 1432

UNDER	the Insolvency Act 2006
IN THE MATTER OF	the bankruptcy of JOHN THERON HETTIG
BETWEEN	SOUTHERN CROSS ENTERPRISES LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) Judgment Creditor
AND	JOHN THERON HETTIG Judgment Debtor

Hearing:	18 June 2015
Appearances:	C T Hames for Creditor C Jones for Official Assignee
Judgment:	18 June 2015

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

Solicitors:

MinterEllisonRuddWatt (Haines) Auckland, for Judgment Creditor

Official Assignee’s office (C T Jones) Auckland.

SOUTHERN CROSS ENTERPRISES LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) v HETTIG [2015] NZHC 1432 [18 June 2015]

[1] Mr Hettig was adjudicated bankrupt on the application of Southern Cross

Enterprises Ltd (in rec and in liq) on 30 April 2015.

[2] Mr Hettig applied on 19 May 2015 to have his adjudication annulled. His application is made under s 309(1)(a) of the Insolvency Act 2006. That provides that any adjudication made may be annulled if the court considers that the bankrupt should not have been adjudicated bankrupt. I am advised that since being adjudged bankrupt, Mr Hettig has been co-operative with the Official Assignee. He has provided a statement of affairs so as to start time running under s 290. I do not regard the facts that he has co-operated with the Official Assignee and that he has provided a statement of his affairs as barring his ability to apply for annulment.

[3] The enquiry is whether Mr Hettig has any grounds to have his adjudication annulled.

[4] The act of bankruptcy on which the creditor relied to have Mr Hettig adjudged bankrupt was non-compliance with a bankruptcy notice. The bankruptcy notice was served on Mr Hettig on 24 February 2015. The adjudication application was lodged after Mr Hettig failed to comply with the notice. Mr Hettig was served with the bankruptcy application on 23 March 2015. He did not take any steps to oppose the application for his adjudication.

[5] The bankruptcy notice is based on a judgment of the District Court at Waitakere of 21 November 2012. The amount of the Waitakere District Court judgment was $19,922.99.

[6] The background to the matter is that Southern Cross Enterprises Ltd was in receivership, the receivers having been appointed by Westpac New Zealand Ltd. The company was one of the Yarrows group of companies. Mr Hettig became involved in a dispute inside the Yarrow group of companies. He helped Mr Paul Yarrow. Southern Cross Enterprises Ltd was the registered proprietor of a property at 71A Princes Street, Northcote Point, Auckland. The receivers wished to sell that

property. Westpac had priority as a secured creditor over that property. Mr Hettig lodged caveats against the title on 2 November 2011 and 23 April 2012. He claimed to have a caveatable interest in the property by virtue of an unregistered mortgage granted by the company through its director, Mr Paul Yarrow.

[7] The case for Southern Cross Enterprises Ltd was that there was no basis for any caveat. Westpac’s rights took priority and there was no equity available in the property in any event. Southern Cross took steps to get rid of the caveats. The second caveat was ultimately extinguished when Westpac sold the property in May

2012. Southern Cross sued Mr Hettig for the additional costs it had been put to in

getting rid of the caveat: receivers’ costs of $6,818.40 plus GST and legal costs of

$6,878.30 plus GST. Southern Cross sued under s 146 of the Land Transfer Act

1952:

Person entering caveat without due cause liable for damages

(1) Any person lodging any caveat without reasonable cause is liable to make to any person who may have sustained damage thereby such compensation as may be just.

[8] At one stage in the District Court proceeding Mr Hettig lodged an appearance but the plaintiffs had that set aside and obtained judgment without the merits of the claim being tested.

[9] In 2013 Southern Cross issued a bankruptcy notice on the basis of the 2012 judgment. There was contact between Mr Hettig and the receivers, but nothing came of it. In April 2013 Mr Hettig applied to have the default judgment set aside. That matter came on for hearing in the District Court at Auckland in October 2014. Judge Menzies gave a reserved decision on 24 October 2014, dismissing Mr Hettig’s

application. The judge correctly applied the test in Russell v Cox.¹ He was satisfied

that Mr Hettig did not have any substantial ground of defence and that setting aside the judgment would cause irreparable injury to Southern Cross. The judge awarded solicitor-client costs to Southern Cross. The costs order came to $48,673.62. The award of full solicitor-client costs shows that the judge took a very dim view of

_{Mr Hettig’s case.}

¹ Russell v Cox [1983] NZLR 654 (CA).

[10] The judgment is significant because it shows that even though judgment was obtained by default against Mr Hettig, he used the opportunity available under the District Court Rules to apply to set aside the judgment. He had the opportunity to explain to the District Court that a miscarriage of justice may have occurred by the default entry of judgment. He failed to persuade the court of that.

[11] In bankruptcy proceedings, the court may in certain circumstances look behind a judgment against a debtor. But once the debtor has used the opportunity to ask the court in which judgment was given to look again at the judgment to see whether it ought to be set aside, it is no longer open to the debtor to contest the validity of the judgment in this court.

[12] Mr Hettig has tendered documents which he says are fresh evidence which I should look at to take a different view of the matter. The new documents he wishes me to look at are the decision of the Court of Appeal in Gilles Bakery Ltd v Gillespie

& Ors,² a minute of Associate Judge Abbott in the proceeding VML Holdings Ltd v

Yarrow Charitable Trust,³ and a pleading in a proceeding in the New Plymouth

Registry: Yarrow v Finnigan.⁴

[13] With regard to the merits of Mr Hettig’s application for annulment, those documents are entirely irrelevant. They have no bearing on the issues of Mr Hettig’s debt to Southern Cross under the Waitakere District Court judgment. Mr Hettig has not placed anything before the court that could suggest that that judgment can now be put into question. In particular, as Judge Menzies noted, Mr Hettig has not placed before the District Court – nor has he placed before this court – any documents that would show any arguable basis for him caveating the title in the first place. The short point is that Mr Hettig is a vexatious caveator. He has correctly been held liable in damages for having lodged a caveat without reasonable cause. Nothing he

_{has said today has persuaded me to take a different view.}

² _{Gilles Bakery Ltd & Ors v Gillespie & Ors [2015] NZCA 93 [25 March 2015].}

³ _{VML Holdings Ltd v Yarrow Charitable Trust CIV-2013-443-10, 23 July 2013.}

⁴ Yarrow v Finnigan HC New Plymouth CIV-2011-443-330.

[14] In all the circumstances, I am satisfied that Mr Hettig is properly indebted to Southern Cross Enterprises Ltd for damages arising out of his lodging caveats without reasonable cause. Judgment was entered against him correctly, and that judgment has been an appropriate basis upon which a bankruptcy application was launched. There is no challenge to the fact that he committed an act of bankruptcy. There was proper compliance with the requirements of the Insolvency Act in obtaining the order for adjudication. There is no ground that I can see for believing that Mr Hettig should not have been adjudicated bankrupt. Accordingly I dismiss his application for annulment.

[15] There is the question of costs. Even though this has been an unmeritorious application, I order standard category 2 costs on the application. I record that this matter has taken one appearance this morning, and less than a quarter of a day to hear this afternoon.

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

Associate Judge Bell