THE COMMISSIONER OF INLAND REVENUE v SHARMA [2015] NZHC 1124

THE COMMISSIONER OF INLAND REVENUE v SHARMA [2015] NZHC 1124 [28 May 2015]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV-2014-419-246[2015] NZHC 1124BETWEEN THE COMMISSIONER OF INLANDREVENUEPlaintiffAND IRENE REENITA SHARMADefendantHearing: 21 May 2015Appearances: Ms M Brown for plaintiffMr A Nolan for defendantJudgment: 28 May 2015JUDGMENT OF ASSOCIATE JUDGE J P DOOGUEThis judgment was delivered by me on28.05.15 at 4 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateIntroduction[1] In this proceeding, Ms Sharma seeks an order setting aside the bankruptcy notice which the Commissioner served upon her.[2] The background which follows is taken from the submissions that counsel for the Commissioner, Ms Brown, filed for the hearing. The outline of the events is not disputed by Ms Sharma.Background[3] The Commissioner obtained sealed judgment against Ms Sharma on 20 February 2013 following a hearing in the District Court at Hamilton on 31 January 2013 before Marshall DCJ.[4] Ms Sharma subsequently appealed the decision of Marshall DCJ on 1 March 2013. She discontinued the appeal on 8 July 2013.[5] On 9 June 2014 the Commissioner filed a request for the issue of a Bankruptcy Notice.[6] On 30 September 2014 Ms Sharma was served with the Commissioner'sBankruptcy Notice by way of substituted service, by affixing the Order for Substituted Service and the Bankruptcy Notice to the front door of her private residence located at 166B Bankwood Road, Chartwell, Hamilton.[7] On 14 October 2014 Ms Sharma filed an interlocutory application to set asidethe Bankruptcy Notice and supporting affidavit ("the Application"). TheCommissioner was not served with the Application.Failure to serve the affidavit in support of the application[8] The Commissioner submits that the failure on the part of Ms Sharma to serve the application for order setting aside bankruptcy notice and supporting affidavit is a fatal flaw in her proceeding, which must result in the proceeding being dismissed.[9] For her part, Ms Sharma submits that the important matter was that she had filed the proceeding in time. She did so on 4 November 2014, and there is no dispute between the parties about the date of filing. Ms Sharma has not produced any evidence establishing that the application and supporting affidavit was actually served on the Commissioner.[10] Ms Brown, for the respondent, referred me to s 17(1) of the Insolvency Act 2006, which provides: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.[11] The time limit specified in subsection (4) is 10 working days after service, if the debtor is served with the bankruptcy notice in New Zealand.[12] Ms Brown further referred to the fact that the Bankruptcy Notice, as prescribed in Form B2 of the High Court Rules 2008, sets out the procedure for counter claim, set-off or cross-demand. That procedure requires that an application and supporting affidavit must be filed in the High Court and served on the judgment creditor. She also made reference to the case of ANZ Bank New Zealand Ltd v Edwards,1 in which the judgment debtor had filed the application to set aside the bankruptcy notice in time but had failed to serve the judgment creditor within the 10 working day timeframe. Sargisson AJ struck the application out and made the following comments:2[8] The Court's decision in Re Memelink ex parte Sanco (NZ) Ltd is apposite. In that judgment, Associate Judge Gendall (as he then was), states that it is clear from a number of judgments that once the tenth day after service of a bankruptcy notice has passed, an act of bankruptcy occurs. As he pointed out, any provisions, be they in the Act or elsewhere which provide for some extension of time for bringing in serving applications, will not assist. Simply put, they cannot undo an event which has occurred, namely the act of bankruptcy.[9] As the debtor was required by the bankruptcy notice to both file and serve any application to set the notice aside within the ten day statutory time period allowed, she has failed to comply with the bankruptcy notice as required by s 17. As it is clear from the wording of the Act and the provisions in Form B2, that a Judgment Debtor has only ten working days from the date the bankruptcy notice is served on him or her to apply to this Court to set aside the notice, the application is a nullity and must be struck out.[10] The Court has no power to extend the time within which such anapplication must be made[13] I agree with the above judgment. The applicant has failed to make her application in time. There can be one result only which is that the application has to be dismissed and I order accordingly.[14] Ms Brown submitted that the combined effect of s 17 of the Act, Form B2 and ANZ Bank New Zealand Limited v Edwards is that Ms Sharma's application is a1 ANZ Bank New Zealand Ltd v Edwards [2013] NZCH 2756.2 ANZ Bank New Zealand Ltd v Edwards, above n 1 (footnote omitted).nullity and should be struck out on the basis that she did not serve the Commissioner within the 10 working day timeframe as required by s 17(4) of the Act.[15] I would expect the parties to agree the matter of costs. If they cannot, they should advise the Registrar and I will allocate hearing time to resolve that issue._____________J.P. DoogueAssociate Judge