HUNT V LION LIQUOR RETAIL LIMITED HC PMN CIV-2006-454-358

HUNT V LION LIQUOR RETAIL LIMITED HC PMN CIV-2006-454-358 11 October 2006IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY CIV-2006-454-358IN THE MATTER OF The Insolvency Act 1967 AND IN THE MATTER OF The Bankruptcy of Adrienne Paula Hunt BETWEEN ADRIENNE PAULA HUNT Applicant AND LION LIQUOR RETAIL LIMITED Respondent Hearing: 10 October 2006 (by telephone conference) Appearances: R.B. Lewis for Applicant P. Drummond for Respondent Judgment: 11 October 2006 at 2.15pm In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 2.15pm on the 11th day of October 2006.JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL Introduction[1] The applicant was adjudicated bankrupt on the petition of the respondent at the Palmerston North High Court on 2 October 2006. The applicant has now applied for an annulment of this adjudication pursuant to s119(1)(a) Insolvency Act 1967. [2] A preliminary issue arises as to whether the applicant here has standing to bring this application. [3] In Brookers Insolvency Law at paragraph IA119.03 the authors comment:A bankrupt may be a 'person interested' with standing to apply for annulment of adjudication, see Auckland CC v Glucina [1997] 2 NZLR 1; Holdgate v Campin (HC AK, 17 December 1997, B1545/96, Master Anne Gambrill). However, the context of the Act restricts the circumstances in which the bankrupt could apply for annulment. Generally, all property vests in the Official Assignee under s42, with some exceptions, and the Assignee has standing to apply to annul the adjudication. The most likely ground on which a bankrupt may apply would be that the order should not have been made. The other three grounds under s119(1) are within the control of the Official Assignee.[4] And, Brookers Insolvency Law goes on to provide in paragraph IA119.03:If the bankrupt contends that the order should not have been made, they will have to adduce evidence of matters that were not before the Court when the adjudication was made[5] Here the applicant does apply pursuant to s119(1)(a) Insolvency Act on the basis that the order of adjudication should not have been made. I am satisfied therefore that she is a "person interested" in terms of s119(1) Insolvency Act 1967 and does have standing to bring this application. And, the applicant does contend that at the times she was adjudicated bankrupt there were facts not known to this Court which should have prevented an order for adjudication being made. [6] In the application for annulment, those material facts were stated to be:(1) That an offer had been made on 2 September 2006 by the applicant for repayment of the debt. (2) The matter was accordingly adjourned on 4 September 2006 by Associate Judge Gendall to allow the respondent to consider the offer. (3) The offer was accepted by the respondent by way of facsimile on 19 September 2006. (4) Payments were to commence by way of automatic payment on 29 September 2006 and the applicant had been setting money aside to make such payments. (5) Due to a misunderstanding and due to no fault of the applicant, the automatic payment forms were not lodged with the applicant's bank. (6) The applicant's solicitor was not informed of the respondent's subsequent issuance of bankruptcy until 3 October 2006. (7) The respondent has been informed of the misunderstanding and accepts that it was not an unwillingness of the applicant to pay that led to the omission of the lodgement of the automatic payment form. (8) The respondent consents to the annulment of the order for adjudication.Background Facts[7] When the order for adjudication was made by this Court on 2 October 2006, Mr Drummond appeared as counsel for the respondent. There was no appearance by the applicant or by counsel for the applicant. [8] At the hearing on 2 October 2006 Mr Drummond properly informed the Court that although an agreement to settle this matter had been reached earlier between the applicant and the respondent, the respondent had defaulted on this agreement. On this basis Mr Drummond confirmed that as an act of bankruptcy had occurred and was unremedied, the respondent was seeking an order for adjudication. [9] It was on that basis that the order for adjudication was made. [10] It seems now from subsequent evidence before this Court (the affidavit of the applicant dated 5 October 2006 and the affidavit of Mr R.B.V. Lewis dated 6 October 2006) that the reason for the applicant's failure to comply with this settlement agreement was through no fault of her own. [11] It appears that following the earlier acceptance of the settlement proposal, the respondent as judgment creditor had forwarded automatic payment forms to Mr Lewis, counsel for the applicant, for completion and lodgement. [12] Mr Lewis confirms that he failed to pass these automatic payment forms onto the applicant, and he has accepted responsibility for this failure. It appears that this occurred as Mr Lewis was ill at the time the forms were received by his office (he was briefly hospitalised around this time), and at the same time another partner in his firm and two staff members were either away on leave or unable to work fulltime, also because of illness. Mr Lewis contends that this helped to create the environment whereby an error of this nature could occur. [13] Mr Lewis advises that it was not until his return to work that he discovered that sending the automatic payment authority to the applicant as judgment debtor had been overlooked, and that as a result in the meantime she had been adjudicated bankrupt.[14] To his credit, Mr Lewis has acknowledged at paragraph 3.7 of his 6 October 2006 affidavit:The error is mine and mine alone. At the time of the adjudication neither the Court nor the judgment creditor were aware that the failure of the judgment debtor to meet arrangements agreed for payment of the judgment debt was mine and not hers.My Decision[15] Taking into account all those matters, I am satisfied that this is a case where the provisions of s119(1)(a) Insolvency Act 1967 apply, and it is appropriate for an order for annulment to be made. I now set out my reasons for reaching that conclusion. [16] Section 119(1)(a) Insolvency Act 1967 states:(1) In any of the following cases the Court may by order, on the application of the Assignee or any person interested, annul the adjudication – (a) where the Court is of the opinion that the order of adjudication should not have been made[17] Brookers Insolvency Law states at paragraph IA119.02:Despite the discretion it gives to the Court, ss(1)(a) should be interpreted narrowly. Generally, it will not provide grounds for interfering with a discretion exercised on a properly brought adjudication petition unless there was some defect in procedure, abuse of process, or where some material fact was not brought before the Court making the adjudication order: Re Hunter ex parte CIR (2000) 19 NZTC 15, 722.[18] Here, I am satisfied that material facts were not brought to the notice of the Court when the order for adjudication was made. These were that the only reasons for non-compliance with the earlier settlement agreement reached between applicant and respondent was the oversight of the applicant's solicitor caused by ill health and inadvertence. [19] Section 119(2) Insolvency Act 1967 requires a copy of the application for annulment to be served upon the Official Assignee. This has occurred here. The Official Assignee has provided a report to the Court under s119 Insolvency Act 1967. This notes that the Official Assignee has no objection to an annulment of the bankruptcy, provided that the Official Assignee's costs and disbursements of $678.12are paid, together with the petitioning creditor's costs and disbursements, and that no creditor objects to the annulment. [20] So far as other creditors are concerned, it appears that apart from the debt to the respondent as judgment creditor, the only other debts owing by the applicant are to Motor Trade Finance ($1,300.00 owing under a standard vehicle financing agreement) and to Telecom ($139.00, being a current telephone account). [21] It seems that these other debts to Motor Trade Finance and Telecom are current. And, the respondent Lion Liquor Retail Limited through its counsel Mr Drummond has indicated that it has no objection to the annulment sought here. [22] In explanation of her current circumstances, the applicant at paragraph 14 of her 5 October 2006 affidavit states:I am not insolvent but am having difficulty getting my relationship property from my husband as he simply won't address issues with me and I always end up having to deal with his uncle. I am confident that I will get an entitlement and that this will clear the debt to the judgment creditor, or at least be enough to fully and finally settle my obligation to the judgment creditor.[23] And, as to the issue of the petitioning creditor's costs and disbursements, before me Mr Drummond for the respondent creditor indicated first that the respondent understood that the costs and disbursements already ordered against the applicant on the bankruptcy petition itself were unlikely to be paid before an annulment could be achieved, and secondly, the respondent also sought costs on a category 2B basis with respect to the attendances required on the present application for annulment. Both these amounts for costs and disbursements, according to Mr Drummond, could await payment in the normal course once an order for annulment was made. [24] For all the reasons outlined above, I am satisfied that this is an appropriate case for the Court to exercise its discretion under s119(1)(a), and to annul the applicant's adjudication in bankruptcy. This annulment is on the basis that an important and material fact was not brought before this Court when it made the adjudication order. [25] The following orders are now made:(1) That the order of adjudication in bankruptcy of the applicant dated 2 October 2006 is annulled pursuant to s119(1)(a) Insolvency Act 1967. (2) This order is not to be sealed until the Court has received confirmation that the Official Assignee's costs and disbursements of $678.12 have been paid. (3) Costs on a 2B basis are awarded to the respondent with respect to the present application for annulment, together with disbursements, if any. These costs are to be paid by the applicant subsequent to the order for annulment. (4) The respondent creditor's earlier costs and disbursements ordered to be paid by the applicant on the bankruptcy petition are confirmed and are also to be paid subsequent to the order for annulment. (5) Although the order for annulment is made pursuant to s119(1)(a) Insolvency Act 1967, for the sake of completeness I record that these present orders were made at 4.05pm yesterday, 10 October 2006. __________________________Associate Judge D.I. GendallSolicitors:Lewis Beavon Law, Palmerston North for Applicant P. Drummond, Palmerston North for Respondent Ministry of Economic Development, Napier (Anna Gillespie) for Official Assignee