SHARMA V WATI HC AK CIV-2008-404-006367

SHARMA V WATI HC AK CIV-2008-404-006367 30 November 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2008-404-006367CIV-2008-404-006369CIV-2008-404-006370CIV-2008-404-006371CIV-2008-404-006375BETWEEN DEO DATT SHARMADebtor/ApplicantAND NIRMALA WATICreditor/RespondentHearing: 30 November 2011Counsel: Debtor/Applicant in personAJH Witten-Hannah for Creditor/RespondentJudgment: 30 November 2011ORAL JUDGMENT OF RODNEY HANSEN JSolicitors: Witten-Hannah Howard, 187 Hurstmere Road, Takapuna, AucklandIntroduction[1] Dr Sharma applies for leave to appeal against my judgment delivered on 30 September 2011.1 In the judgment I upheld the refusal of Bell AJ to set aside fivebankruptcy notices issued by Ms Wati, Dr Sharma's former wife. The notices werebased on costs orders made against Dr Sharma in the Family Court, this Court, the Court of Appeal and the Supreme Court.[2] Before Bell AJ and in argument before me, Dr Sharma argued that the bankruptcy notices should be set aside on the grounds that he had a counterclaim against Ms Wati and that four of the five bankruptcy notices are invalid because of non-compliance with the High Court Rules.[3] On the counterclaim issue, I agreed with Bell AJ that a Family Court judgment, as amended by Allan J following a successful appeal to this Court, did not create a future debt which could found a counterclaim. I said in my judgment:2Dr Sharma attempted to argue that Allan J's judgment did not have the effectof quashing the order for payment of $177,500. That is plainly wrong. Asnoted above, Allan J's judgment completely changed the basis on whichrelationship property is to be divided. An alternative argument which he advanced at the hearing was that his entitlement to a share in the proceeds ofsale of the house when Ms Wati's right to occupation comes to an end is a debt due to him which qualifies as a counterclaim. There is no merit in thatcontention either. Bell AJ's analysis on this issue is unassailable. (Footnote omitted.)[4] I also rejected the alternative argument that the issue of whether a counterclaim existed should be determined by reference to the original Family Court judgment. I held that the existence of a counterclaim fell to be considered at the time the application to set aside the bankruptcy notices was determined. I ruled that this naturally followed from the provisions of s 17 of the Insolvency Act 2006 and r 24.10 of the High Court Rules. By that time the appeal which changed the basis of the Family Court judgment had been determined.1 Re Sharma, ex parte Wati HC Auckland CIV-2009-404-6367, 30 September 2011.2 Ibid, at [14].[5] On the issue of the claimed non-compliance of the bankruptcy notices withthe High Court Rules, I rejected Dr Sharma's submission that the bankruptcy noticesin issue should be set aside because they failed to annex certified copies of the judgments or orders. I held that, to the extent that there were irregularities in the bankruptcy notices, s 418 of the Insolvency Act applied to cure any defects.Principles on which leave to be granted[6] The application for leave to appeal is brought pursuant to s 26P(1AA) of the Judicature Act 1908 which permits a party affected by a decision following an application to review an Associate Judge's decision to seek leave to appeal to the Court of Appeal. Applications for leave under s 26P(1AA) are guided by the same principles as those for second appeals under s 67 of the Judicature Act.3[7] Those principles are set out in Waller v Hider4 and Snee v Snee.5 In Waller v Hider it was said:6... The appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal ... [T]he guiding principle must be the requirements of justice. ...The scarce time and resources of the High Court and of this Court are not to be wasted, nor additional expense for an unsuccessful client incurred without realistic hope of benefit. ...It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.[8] The Court of Appeal in Snee v Snee confirmed these principles and commented:7... It is the High Court, as the intermediate appellate Court, that has primary responsibility for correcting error and ensuring that justice is done to the parties. Only if the case involves some wider public interest will the expense, both to the parties ... and to the Court system, of a second appeal be justified.3 Payne v Attorney-General [2005] NZFLR 846 (CA) at [5].4 Waller v Hider [1998] 1 NZLR 412 (CA).5 Snee v Snee (1999) 13 PRNZ 609 (CA) at 612-613.6 Waller, above n 4, at 413.7 Snee, above n 5, at [21].[9] Dr Sharma submits that I erred in deciding that the existence or otherwise of a counterclaim must be determined by reference to Allan J's judgment and in findingthat the irregularities in the bankruptcy notices on which he relied do not justify setting the notices aside. There is nothing in the arguments he has advanced before me today to persuade me that either issue raises a question which warrants the grant of leave.Counterclaim[10] Before briefly addressing his argument in relation to the counterclaim, I set out, for convenience, the relevant parts of s 17 of the Insolvency Act and of r 24.10:17 Failure to comply with bankruptcy notice(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(b) if the debtor is served outside New Zealand, the time specified in the order of the court permitting service outside New Zealand.24.10 Setting aside bankruptcy notice(1) If an application to set aside a bankruptcy notice cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.(2) An act of bankruptcy is not committed by reason only of non- compliance with the notice until the application has been determined.[11] Dr Sharma argues that r 24.10 does not have the effect of extending the time in which a debtor may comply with the requirements of a bankruptcy notice or prove the existence of a cross-claim. His argument, as I understand it, is that the rule hasthe effect of "pausing" time so that any events occurring after filing the applicationto set aside the bankruptcy notices cannot be taken into account in determining whether a debtor has a valid cross-claim.[12] I am not persuaded that my interpretation of the effect of r 24.10 is incorrect. Section 17 provides that an act of bankruptcy will be committed if the requirements of subsection (1) are satisfied. They, relevantly, include the requirement that within the time limit the debtor has not either complied with the notice or satisfied the Court that he or she has a cross-claim against the creditor. That time limit is extended by r 24.10 to the time at which the application to set aside is determined. That is when the debtor needs to satisfy the Court that he or she has a counterclaim. In this case, the relevant time was when Bell AJ determined the application. By that time, Allan J's judgment had set aside the Family Court judgment and disposed of anyargument that Dr Sharma had a counterclaim.Non-compliance[13] In his submissions in relation to the non-compliant bankruptcy notices, Dr Sharma has reiterated his argument that the failure to annex certificates in accordance with the Rules provides grounds to set aside the notices. He has also introduced for the first time an argument that one of the costs orders was not in fact made. For that purpose he relies on a judgment of Sargisson AJ.88 Sharma v Wati HC Auckland CIV-2008-404-3124, 28 October 2008.[14] I accept Mr Witten-Hannah's submission that the judgment of Sargisson AJ is a red herring and has no application to the issues I am required to determine. However, even if that were not the case, any challenge to that costs order should have been supported by an affidavit filed in support of the original application to set aside the notices.[15] Dr Sharma has not sought to challenge my finding that any non-compliance was of a technical nature and that s 418 of the Act applied to cure any defects in the bankruptcy notices. There is nothing to alter the view expressed in my judgment that the defects have no practical consequence. There was no prejudice to Dr Sharma. The notices were fully effective to identify and prove the debts relied on.Conclusion[16] I am satisfied that there is no question of law or fact capable of bona fide andserious argument which could warrant the cost and delay of a further appeal.Further, the interest involved is of a purely private character, arising fromDr Sharma's stubborn refusal to honour orders for costs, including orders madefollowing unsuccessful proceedings before the Court of Appeal and Supreme Court.He seeks to resist payment on the basis of spurious defences, relying on a right tocounterclaim which, while once arguable, no longer exists, and complaints about thebankruptcy notices that are of a highly technical and unmeritorious nature. For thesereasons, the application for leave to appeal must fail.[17] Mrs Wati is entitled to costs on a category 2 band B basis. Mr Witten- Hannah has handed up a schedule of costs supporting an order based on a total time of 1.55 days which, at a daily rate of $1,880, entitles Mr Witten-Hannah to costs in the sum of $3,914.