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High Court of New Zealand Decisions |
Last Updated: 2 May 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
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BETWEEN
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NEW ZEALAND POLICE
Judgment Creditor
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AND
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PETER RICHARD PRESCOTT
Judgment Debtor
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Hearing:
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26 March 2018
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Counsel:
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K M Wakelin for the Judgment Creditor
P R Prescott (Self-represented Judgment Debtor) in Person
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Judgment:
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9 April 2018
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JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by Associate Judge Smith on 9 April 2018 at 3.30 pm at Auckland, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Meredith Connell (Office of the Crown Solicitor), Auckland
Copy To: P R Prescott, Auckland
NEW ZEALAND POLICE v PETER RICHARD PRESCOTT [2018] NZHC 618 [9 April 2018]
[1] The judgment creditor (NZ Police) applies for an order adjudicating the judgment debtor (Mr Prescott) bankrupt.
[2] The background to the adjudication claim is as follows.
[3] On 18 May 2011, Mr Prescott was arrested by NZ Police following a routine traffic stop. Mr Prescott was sitting in his parked vehicle when he was observed by two police constables. One of them approached him with a view to checking whether his vehicle warrant of fitness was current. Mr Prescott declined to let the police constable into his vehicle to see the registration sticker from the inside, and he was subsequently arrested for obstruction of a police officer in the execution of his duty.
[4] Mr Prescott was taken to the North Shore police station for processing, arriving at about 3.25 pm. For part of the time after arriving at the police station, he was held in a cell, before being released on bail at 5.12 pm.
[5] Mr Prescott alleges that his arrest and subsequent detention were unlawful. In 2014, he commenced a proceeding against NZ Police in the District Court at Auckland, claiming damages of $10,000 in respect of an alleged breach of his right not to be arbitrarily arrested or detained1, and $5,000 for an alleged breach of his right to consult and instruct a lawyer2.
[6] Mr Prescott’s claim proceeded to a hearing on 5 and 6 April 2016 before Judge Cunningham. On 10 August 2016, Her Honour delivered a reserved judgment dismissing Mr Prescott’s claim.3
[7] On 17 October 2016, Judge Cunningham awarded costs to the NZ Police of
$27,111.02.
1 New Zealand Bill of Rights Act 1990, s 22.
2 New Zealand Bill of Rights Act s 23(1)(b).
3 Prescott v New Zealand Police [2016] NZDC 14357.
[8] Mr Prescott filed an appeal to this Court against the judgment of Judge Cunningham. He also filed an application for judicial review, alleging among other things, bias on the part of the Judge.
[9] On 4 October 2016, Woodhouse J directed that the judicial review application and the appeal were to be heard together. The judicial review application and the appeal have now been set down for hearing on 14 August 2018.
[10] Mr Prescott applied for a stay of enforcement of the order for costs made by Judge Cunningham, but on 3 April 2017, Moore J declined the application.4 His Honour awarded scale costs to NZ Police of $5,686.50, plus disbursements of
$1,302.51 (total $5,819.01).
[11] In May 2017, Mr Prescott filed an application for leave to appeal out of time to the Court of Appeal against the decision of Moore J, but he did not pay the security for costs on the appeal and the appeal was eventually abandoned on 18 November 2017. The position remains that no stay of enforcement order operates in respect of the costs orders made by either Judge Cunningham or Moore J.
[12] On 2 June 2017, NZ Police issued a bankruptcy notice against Mr Prescott. The bankruptcy notice claimed only the costs award of $5,819.01 made by Moore J. Mr Prescott promptly filed an application to set aside the bankruptcy notice, and that application was heard by Associate Judge Bell on 25 October 2017.5 The learned Judge dismissed Mr Prescott’s application to set aside the bankruptcy notice, and noted that the result of that decision was that, under r 24.10 of the High Court Rules, the time for Mr Prescott to comply with the bankruptcy notice had expired.
[13] On 15 November 2017, Associate Judge Bell ordered Mr Prescott to pay the further sum of $9,923.50 on his failed application to set aside the bankruptcy notice. By then, the total costs awarded by Judge Cunningham, Moore J, and Associate Judge Bell, came to $44,884.81.
4 Prescott v Police [2017] NZHC 620.
5 Prescott v Police [2017] NZHC 2701.
[14] By notice dated 6 December 2017, Mr Prescott applied to the Court of Appeal for leave to appeal out of time against the judgment of Associate Judge Bell declining to set aside the bankruptcy notice. Mr Prescott took only one point on this appeal, and that is that the Insolvency Act 2006 (the Act) does not extend to him as a “natural person”.
[15] On 16 January 2018, NZ Police filed a memorandum and affidavit in the Court of Appeal opposing Mr Prescott’s appeal against the judgment of Associate Judge Bell. Mr Prescott had also applied to the Registrar of the Court of Appeal for an order waiving the filing fee on his appeal, but that application had been declined by the Registrar. Mr Prescott sought a review of that decision. On 16 February 2018, Brown J issued a judgment upholding the Registrar’s decision.6 Mr Prescott was ordered to pay the fee of $1,100 to the Court of Appeal by 23 February 2018. He did not do so, and so cannot take any further steps in that proceeding until he does so.
[16] NZ Police filed its application for an adjudication order on 22 January 2018. The application stated the amount owing by Mr Prescott at the full figure of
$44,884.81 owing on the three other costs judgments given by Judge Cunningham, Moore J and Associate Judge Bell. Mr Prescott filed a notice of opposition on 1 March 2018. The application was listed for first call on 7 March 2018.
[17] In advance of the hearing on 7 March 2018, Mr Prescott filed a number of other documents, including a two-page document dated 19 January 2018 headed “Applicant’s application for findings of fact and conclusions of law”, and a request for a transcript of the hearing on 25 October 2017 before Associate Judge Bell. The “Applicant’s application for findings of fact and conclusions of law” sought findings or answers on a total of 13 matters, all designed to “clarify how the determination of Associate Judge Bell dated 25 October 2017 ... was arrived at”. Mr Prescott stated that the transcript was required for an appeal he had filed in the Court of Appeal against the judgment of Associate Judge Bell.
[18] On 2 March 2018, Mr Prescott filed a memorandum advising that he had paid the sum of $16,079.39 to NZ Police, “under duress and the threat of financial harm”.
6 Prescott v New Zealand Police [2018] NZCA 16.
He said the $16,079.39 represented the full amount NZ Police could seek in its adjudication claim. The amount paid by Mr Prescott appears to be the total of the costs judgments made by Moore J and Associate Judge Bell, with interest.
[19] In his 2 March 2018 memorandum, Mr Prescott contended that the amount in the adjudication application was overstated by $28,805.42, on the basis that that sum had not been the subject of any bankruptcy notice. Further, the $28,805.42 was subject to an appeal and a judicial review application, and should not have been included in the adjudication claim.
[20] Counsel for NZ Police filed a memorandum dated 5 March 2018. Counsel referred to correspondence with Mr Prescott in December 2017 in which the Police made an open offer to settle all three costs awards in the reduced sum of $29,298.02. Mr Prescott had responded on 13 December 2017, stating that he would organise the money to go into the trust account, and it would take about a week. Mr Prescott did not pay the money within a week, and it was not until March 2018 that he paid the
$16,079.39 referred to above.
[21] Counsel for NZ Police had not had adequate time to consider Mr Prescott’s notice of opposition by 7 March 2018. The matter was adjourned to 26 March 2018.
[22] Both parties filed further documents before the hearing on 26 March 2018. Counsel for NZ Police filed an updating memorandum, and Mr Prescott filed a more detailed memorandum supported by an affidavit sworn on 22 March 2018. At the hearing, Mr Prescott also spoke to a supplementary memorandum, copies of which were provided to the Court and counsel for NZ Police.
[23] I will return to the parties’ submissions later in this judgment. For present purposes, it is enough to note that NZ Police took the position that there was no basis to further adjourn the adjudication application, and that an order for adjudication should be made immediately.
[24] Mr Prescott took the position that it would be unfair to make an adjudication order, and the Court should either make a halt order under s 42(2) of the Act, halting
the adjudication proceeding until Mr Prescott’s appeal and judicial review application have been determined, or should allow further time for his arguments in opposition to the adjudication application to be heard.
Relevant legal principles
[25] Section 13 of the Act provides:
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.
[26] Section 17 of the Act materially provides:
(1) A debtor commits an act of bankruptcy if—
(a) a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b) execution of the judgment or order has not been halted by a court; and
(c) the debtor has been served with a bankruptcy notice; and
(d) the debtor has not, within the time limit specified in subsection (4),—
(i) complied with the requirements of the notice; or
(ii) satisfied the court that he or she has a cross claim against the creditor.
...
(4) The time limit referred to in subsection (1)(d) is,—
(a) if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service; or
...
[27] The other relevant statutory provisions of the Act are ss 37 and 42. Those sections provide:
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.
42 Halt or refusal of application when judgment under appeal
(1) This section applies if the creditor's application for adjudication relies on one of the following acts of bankruptcy:
(a) the debtor failed to comply with a bankruptcy notice (see section 17):
(b) a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28).
(2) If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the Court may—
(a) halt the creditor's application for adjudication; or
(b) refuse the application.
The exercise of the Court’s discretion under s 37(c) and (d) to refuse to make an adjudication order
[28] The Court’s general discretion under s 37(c) and (d) of the Act was described by the Court of Appeal in Baker v Westpac Banking Corporation as follows:7
7 Baker v Westpac Banking Corporation CA212/92, 13 July 1993 at 4.
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. A creditor who establishes the jurisdictional facts as set out in [the equivalent of s 13 of the Act] 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. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[29] In Rabobank Australia Ltd ex parte Tootell,8 Associate Judge Osborne referred to the decision of Master Williams QC in Re Epirosa, ex parte Diners Club & American Express International Inc.9 In that case, the Master set out a list of factors which he considered relevant to the exercise by the Court of its discretion:
(a) What are the wishes of all affected parties, including the applying creditor, other creditors and the debtor?
(b) Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?
(c) What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?
(d) Will adjudication be pointless?
(e) Will the debtor, if adjudicated, be rendered unable to support himself or herself?
8 Rabobank Australia Ltd ex parte Tootell [2013] NZHC 2975.
[30] In Re Fidow Fisher J noted:10
...it does appear that as a matter of legal authority one should not necessarily decline a bankruptcy merely on the ground that there are no obvious assets for the creditors. Clearly that must be a powerful factor to consider. But there are several other considerations which may be of equal importance.
One of these 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. I have previously adverted to the possibility that some investigation in this case might be rewarding. I intend no reflection upon Mr Fidow by that comment. In the finish, investigation may reveal nothing that is not already known. But I cannot entirely rule it out as a possible avenue of benefit for the creditors.
The next matter to be borne in mind here is that on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate party to the proceedings...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.
The Court’s discretion to make a halt order under s 42(2)
[31] The Court has a wide discretion when deciding whether to halt an application for an adjudication order under s 42.11 The discretion is unfettered, but the following factors have generally been considered to be important:12
(a) The bona fides of the judgment debtor in prosecuting the pending appeal (this does not generally include a consideration of the merits of the appeal unless the Court considers that there is absolutely no prospect of success);
(b) What stage the appeal has reached and whether there has been delay in prosecuting the appeal;
10 Re Fidow (a debtor) [1989] NZHC 298; [1989] 2 NZLR 431 (HC) at 33–34.
11 Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV-2009-404-4175, 3 December 2009.
12 At [10].
(c) Whether an order halting the application for an adjudication order would unduly prejudice the judgment creditor; and
(d) Whether the bankruptcy proceeding might render the appeal nugatory as the judgment creditor would be unable to prosecute the appeal.
[32] Associate Judge Faire considered in Re Pillay ex parte ANZ National Bank Ltd that traditional matters taken into account when considering applications for stay could possibly also be taken into account in an application under the section. Those matters are the:13
(i) the effect of the stay on third parties;
(ii) novelty and the importance of the question involved in the appeal;
(iii) public interest in the proceeding under appeal; and
(iv) balance of convenience.
The issues in this case
[33] The Court clearly has jurisdiction under s 13 to make an adjudication order. NZ Police holds a judgment debt for a sum in excess of $1,000, and the debt is for a certain sum. The judgment was payable immediately, and Associate Judge Bell found that Mr Prescott committed an act of bankruptcy when he failed to comply with the bankruptcy notice. Mr Prescott has not provided evidence that he can pay the outstanding costs award and accrued interest on it. Those factors mean there is no basis for the Court to refuse to make an adjudication order on the basis of either s 37(a) or s 37(b) of the Act.
[34] The issues are:
(i) whether the Court should make a halt order under s 42 of the Act pending the hearing of the appeal and judicial review application in this
13 Re Pillay ex parte ANZ National Bank Ltd, above n 11, at [11].
Court on 14 August 2018 (or pending final determination of Mr Prescott’s attempts to appeal the judgment of Associate Judge Bell);
(ii) whether the Court should adjourn the adjudication application to allow Mr Prescott to present further argument or evidence; and
(iii) if no halt order is made, and no adjournment granted, whether the Court should exercise its discretion under s 37(c) or (d) of the Act to refuse to make the adjudication order that the Commissioner seeks.
Discussion and conclusions
Issue 1: Should the Court make a halt order under s 42(2)?
[35] Considering the various matters of potential relevance listed by Associate Judge Faire in Re Pillay, I note first that there is nothing to suggest that Mr Prescott has not been bona fide in pursuing his appeal. Mr Prescott filed the appeal in time, with a judicial review application, and the appeal and the review application have now been set down for hearing on 14 August 2018. While it is not necessary or appropriate to give much consideration to the merits of the appeal, I note that the issues raised by Mr Prescott at the District Court hearing in early April 2016 apparently called for detailed consideration by Judge Cunningham. Her Honour’s decision was not delivered until 10 August 2016.
[36] One of the issues raised by Mr Prescott before Judge Cunningham was whether the police constable ever gave him a “direction” for the purposes of s 116 of the Land Transport Act 1998 to get out of his car, rather than merely directing him to do so. Section 116(1) provides that an enforcement officer may arrest without warrant a person whom the officer has good cause to suspect has failed to comply with a direction given under s 113 or s 115. Section 113 provides general authorisation for enforcement officers in uniform to enforce the provisions of a number of statutes, including the Land Transport Act itself. Judge Cunningham noted that s 113(2) empowered an enforcement officer to inspect a “land transfer document” displayed or carried on the vehicle, and she considered that a warrant of fitness sticker is a “land
transfer document” within the definition of that expression in s 2 of the Land Transport Act.
[37] In his revised notice of appeal, Mr Prescott raises a number of issues, including his right under s 23 of the New Zealand Bill of Rights Act 1990 (NZBORA) to be informed at the time of his arrest or detention of the reason for it. He contends that he was not informed in detail of the reason for the arrest as required under NZBORA. He contends that a bail bond form given to him, and the brief of evidence of one of the two constables involved in the arrest, shows that he was arrested under the Summary Offences Act 1981, and not under the power to arrest conferred by s 116 of the Land Transport Act. He submits that the reference to s 116 of the Land Transport Act was only an afterthought, and that Judge Cunningham erred in law when she wrongly applied s 116 to the evidence contained in the bail bond and the constable’s brief of evidence.
[38] Those are among numerous grounds set out by Mr Prescott in his revised notice of appeal. While both Woodhouse J and Moore J did not consider Mr Prescott’s prospects of success with his appeal and review application were good,14 I do not think it is possible to say at this stage that Mr Prescott has absolutely no prospect of success, particularly on the appeal on the wrongful arrest claim.
[39] A date of hearing has now been allocated for the appeal, and while the appeal hearing is more distant than the three weeks from the date that the Court was considering the halt application in Memelink, ex parte Grindlay,15 where a halt order was granted, I do not think the fact that the appeal hearing in this case is approximately four months away makes enough difference that it would be appropriate to refuse the halt order on that account.
[40] Unlike Re Pillay, this is not a case where I have evidence of a substantial indebtedness to the other creditors, so I do not think there is an evidential basis for
15 Memelink, ex parte Grindlay [2017] NZHC 1549.
concluding that a halt order would put others at risk of Mr Prescott defaulting in his obligations.
[41] There might be some prejudice to NZ Police in that an adjudication order now might save it the time and costs of opposing Mr Prescott’s appeal and judicial review proceedings set down for hearing on 14 August 2018. But it is by no means clear to me that that would be the case. The nature of Mr Prescott’s claims appear to be personal to him, and it may be that they are not claims that would vest automatically in the Official Assignee under s 101 of the Act.
[42] Weighing the considerations as best I can, I conclude that it is appropriate to make the halt order under s 42(2) sought by Mr Prescott. The adjudication proceeding is halted pending the hearing and determination of Mr Prescott’s appeal and judicial review application, presently set down for hearing on 14 August 2018. The halt order is made on the condition that Mr Prescott complies with any remaining timetable or other directions relevant to the 14 August 2018 hearing; if he does not, leave is reserved to NZ Police to apply by memorandum to have the halt order lifted and the adjudication claim listed in the next reasonably available bankruptcy list.
[43] I would not have been prepared to grant any halt order in respect of Mr Prescott’s attempts to appeal the judgment of Associate Judge Bell on the basis that he is not a person to whom the Act applies. I note that in Brown J’s judgment given in the Court of Appeal16 on Mr Prescott’s application for review of the Deputy Registrar’s refusal to grant Mr Prescott a fee waiver on his application for leave to appeal out of time against Associate Judge Bell’s judgment, His Honour recorded that Mr Prescott’s contention on the appeal was that the High Court had no lawful jurisdiction over him because the Act does not apply to him as a natural person.
[44] The Deputy Registrar had rejected the same submission, noting that s 6 of the Act makes it clear that the Act only applies to natural persons (as opposed to corporations and other entities). The Deputy Registrar considered that Mr Prescott’s reliance on the definitions of “person” in s 29 of the Interpretation Act 1999 and s 29 of NZBORA was misconceived because those definitions are non-exhaustive - the use
16 Prescott v New Zealand Police, above n 6.
of the word “includes” in them plainly does not exclude natural persons, but serves to extend the meaning of “person” beyond a natural person to include a corporation sole, a body corporate, and an unincorporated body. The Deputy Registrar considered that those extended definitions were not relevant, because of the express provisions of s 6 of the Act.
[45] Brown J concluded that the Deputy Registrar’s view was plainly correct, and that Mr Prescott’s proposition as to the meaning of “person” in the Act was not arguable.
[46] I agree, and for that reason no halt or stay order is made on the basis that Mr Prescott is still attempting to appeal the judgment of Associate Judge Bell.
Issue 2: Should the Court adjourn the adjudication application to allow Mr Prescott to present further argument or evidence?
[47] In view of the answer I have given on issue 1, there is no need to address this issue.
Issue 3: If no halt order is made, and no adjournment granted, should the Court exercise its discretion under s 37(c) or (d) of the Act to refuse to make the adjudication order that the Commissioner seeks?
[48] Again, in view to the answer I have given on issue 1, there is no need to address this issue. However, in case it should be of importance to the parties going forward, I add that I would not have been prepared to accept Mr Prescott’s submission that NZ Police was not entitled to include the $28,805.42 relating to the costs award made by Judge Cunningham in its computation of the debt as set out in the adjudication application. The fact that that sum was not mentioned in the bankruptcy notice is irrelevant - see Curtis v Commissioner of Inland Revenue.17 Also, a creditor is entitled to proceed with its bankruptcy adjudication application where the debt has been paid but further indebtedness has since accrued.18
17 Curtis v Commissioner of Inland Revenue HC Wellington B244-97, 12 November 1997 at [4].
18 Commissioner of Inland Revenue ex parte Ashby [2012] NZHC 176, (2012) 25 NZTC 20 – 105.
Result
[49] I make a halt order under s 42(2) pending the hearing and determination of Mr Prescott’s appeal and judicial review application, which are due to be heard together in this Court on 14 August 2018. The halt order is made on the condition that Mr Prescott complies with any remaining timetable or other directions relevant to the 14 August 2018 hearing; if he does not, leave is reserved to NZ Police to apply by memorandum to have the halt order lifted and the adjudication claim listed in the next reasonably available bankruptcy list.
Associate Judge Smith
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