MOXHAM MILK LIMITED v CLARK [2022] NZHC 2729

MOXHAM MILK LIMITED v CLARK [2022] NZHC 2729 [20 October 2022]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2021-463-86[2022] NZHC 2729BETWEEN MOXHAM MILK LIMITEDPlaintiffAND STEPHEN GEORGE GIBSON CLARKDefendantHearing: 24 August 2022Appearances: Glenn Mason for the PlaintiffDefendant is self-representedJudgment: 20 October 2022Reissued: 21 October 2022JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR[Adjudicating defendant bankrupt]This judgment was delivered by me on 20 October 2022 at 3:00pmpursuant to Rule 11.5 of the High Court Rules 2016This judgment is re-issued on 21 October 2022 at 3:00pm[with amendments to paragraph [39]]pursuant to r 11.10 of the High Court Rules 2016.Registrar/Deputy RegistrarSolicitors/Counsel:Fenella Devlin, Palmerston North, for the PlaintiffCopy for:Glenn Mason, Barrister, Palmerston North, for the PlaintiffStephen George Gibson Clark (the Defendant)District Court Judge Stephanie B Edwards, District Court, Palmerston NorthIntroduction[1] Moxham Milk Ltd (Moxham) seeks that Mr Stephen Clark be adjudicatedbankrupt.Background[2] This adjudication application relates to a debt deriving from a judgment of theDistrict Court at Levin of 14 December 2020.1 The debt owed is said to be $34,667.31,comprising the order made in the District Court, subsequent costs of $1,014 relatingto a charging order over land and $50 for the cost of the certificate of judgment.[3] Moxham served a bankruptcy notice dated 16 November 2021 and thecertificate of judgment on Mr Clark on 22 December 2021. The last day forcompliance with the bankruptcy notice was 12 January 2022. Mr Clark did not complywith the bankruptcy notice or apply to set it aside.[4] Moxham made the present adjudication application on 16 March 2022,Mr Clark's act of bankruptcy (the noncompliance with the bankruptcy notice) beingwithin three months of that date.[5] The background facts to the District Court decision are that Moxhammistakenly paid a sum of $26,509.80 into Mr Clark's bank account on 18 June 2018.It had intended to pay the sum into the bank account of Zenith Ltd in satisfaction ofan invoice for fertiliser. Moxham was unsuccessful in its attempts to reverse thepayment and sought judgment on the basis it did not owe Mr Clark any money and hewas not lawfully entitled to retain the funds. Judge Edwards was satisfied Mr Clarkhad no defence to Moxham's claim. The Judge gave summary judgment to Moxhamin the sum of $26,509.80, together with interest, schedule costs and disbursements.21 Moxham Milk Ltd v Clark [2020] NZDC 24751.2 At [16].Creditor's application for adjudication order[6] Moxham seeks orders adjudicating Mr Clark bankrupt and as to costs.3[7] The grounds on which the orders are sought are:4(a) the debtor has, for the greater part of the past 6 months, resided at 69Paparoa Road, RD 2, Opotiki; and(b) the debtor owes the creditor $34,667.31 following a final judgment orfinal order made by the Levin District Court on 18 December 2020which sum includes subsequent costs of $1,014.00 and $50.00 for thecost of the certificate of judgment; and(c) the debtor has committed an available act as follows:i. a bankruptcy notice was served on the debtor on 22 December2021 requesting payment of the $34,557.31 within10 working days; andii. the debt remains unpaid.(d) the creditor has no security for the debt.Affidavit of Wayne Moxham dated 16 March 2022[8] Mr Wayne Moxham, director of Moxham, has made an affidavit in support ofthe creditor's application. He deposes he has knowledge of the facts to which theapplication relates, and says they are, to the best of his knowledge, information, andbelief, true.5Affidavit of Wayne Moxham dated 26 April 2022[9] Mr Moxham filed a further affidavit dated 26 April 2022, stating the debt of$34,667.31 owing by Mr Clark to Moxham, upon which the creditor's application isbased, remains unpaid and is unsecured by Moxham.63 Creditor's application for adjudication order dated 16 March 2022 at [1].4 At [2].5 Affidavit supporting creditor's application for adjudication at [2].6 Affidavit of Wayne Owen Moxham on behalf of judgment creditor that debt remains unpaid dated26 April 2022 at [2].Affidavit of Wayne Moxham dated 12 May 2022[10] In a further affidavit dated 12 May 2022, Mr Moxham deposes that inJune 2020, Moxham made an application for summary judgment against Mr Clark inthe District Court following Mr Clark's refusal to refund money paid to him in error.He says the District Court judge found that the money, which is the subject of thepresent application for adjudication, had been paid to Mr Clark and that he was notlawfully entitled to retain it. Mr Moxham says the Court awarded summary judgmentto Moxham.7Affidavit of Wayne Moxham dated 31 May 2022[11] In an affidavit dated 31 May 2022, Mr Moxham reiterates that the debt of$34,667.31 owing by Mr Clark to Moxham, upon which the creditor's application isbased, remains unpaid and is unsecured by Moxham.8Notice of opposition[12] Mr Clark opposes Moxham's application on the following grounds:9A. That the bank account identified as belonging to the defendant in thedecision of Judge S.B Edwards 14th December 2020, Paragraph 15,was not and is not under the control of the defendant at any relevanttime.B. The defendant was, at no time in control of the funds and so at no timecould possibly be "in possession" of the funds.C. That the defendant did not "unlawfully retain the payment"(Paragraph 15 of Judge Edwards decision). The payment wastransferred to the bank account of Eco-Farm Aotearoa Ltd on 26th June2018; five days after the payment was deposited, in accordance withthe lawful instructions received from the administrator of Eco-FarmAotearoa Ltd.D. That the statement contained in paragraph 15 of Judge Edwardsdecision that the defendant "refused to return it [the payment] to theplaintiff" is Null and Void as it is not based on any facts and evidencethat demonstrates the alleged refusal. There was no comprehensionof the simplicity of this matter and so there was a failure to strike it7 Affidavit of Wayne Owen Moxham dated 12 May 2022 at [2]–[3].8 Affidavit of Wayne Owen Moxham on behalf of judgment creditor that debt remains unpaid dated31 May 2022 at [2].9 Notice of intention to oppose application dated 30 May 2022 at [2].out. Instead, and incorrectly the process was continued despite theabsence of evidence supporting Judge Edward's statement.E. Because the defendant was not authorised, was not in control and wasnot in receipt of the funds at any time, therefore was not in a positionto make any decisions regarding the payment.F. Based on the facts and evidence contained in the affidavit filed insupport of this notice.Affidavit of Stephen Clark dated 30 May 2022[13] Mr Clark has made an affidavit in support of his opposition to Moxham'screditor's application. He deposes the bank account identified as belonging to him inthe District Court decision of 14 December 2020 was not, at any relevant time, underhis control. He says the account was a trading account for EcoFarm Aotearoa Ltd, anentity that he does not own, control or manage. He says the District Court judge'sdecision is fundamentally wrong and that he could not have unlawfully retained thepayment where the account in question was not under his control.10[14] Mr Clark deposes he is being falsely held to account for monies that he has notbeen in possession of, received, or had control over. He says further that he has nomeans to pay or return funds that he never possessed. He deposes that Moxham wasinformed by EcoFarm Aotearoa Ltd that it alone was in receipt of the funds; there wasno nexus between receipt of funds, control of those funds and him; he could not andhas not benefited from the funds; the lawyer for Moxham was aware of these facts;and the issuing of proceedings and continuation of them was therefore repugnant andvexatious.11[15] Mr Clark says he does not have the financial means to properly defend himselfagainst the claim and that he is forced to appear as a lay litigant. He says he has almostno assets; the Moxham funds are not in his possession; he has not retained any fundspaid by Moxham to EcoFarm Aotearoa Ltd; if he is bankrupted there will be no assetsto realise to settle any debt; and bankruptcy will serve no useful purpose at all.1210 Affidavit of Stephen George Gibson Clark dated 30 May 2022 at [1]–[5].11 At [6]–[16].12 At [17]–[21].[16] Finally, Mr Clark requests that Moxham's application for adjudication bestruck out; the District Court decision be made null and void; all costs decisions bereversed and awarded in his favour; or, in the alternative, that the Court set theadjudication aside and send the matter for a retrial that includes the correctdefendant.13Reply affidavit of Wayne Moxham dated 23 June 2022[17] Mr Moxham has made an affidavit in reply to Mr Clark's affidavit of 30 May2022. He deposes he does not accept that the bank account into which Moxham paidfunds was not owned, controlled or managed by Mr Clark. He points to email evidencefrom the New Zealand Police, an ANZ Bank diary note, and invoices fromProbitas Systems NZ as confirming Mr Clark's ownership and control of the bankaccount.14Reply-to-reply affidavit of Mr Clark dated 29 June 2022[18] Mr Clark has purported to make an affidavit in reply to Mr Moxham's replyaffidavit of 23 June 2022. He deposes that the New Zealand Police email stating "theANZ account is held by Stephen Clark" does not mean that he controlled or managedthe account.Moxham's submissions[19] Mr Glenn Mason, for Moxham, submits that the requirements of s 13 of theInsolvency Act 2006 are met in the present case. Mr Clark owes a debt of more than$1,000 to Moxham; there has been an act of bankruptcy within the period of threemonths before the filing of the application; the debt is of a certain amount; and thedebt is immediately payable. He says s 36 of the Insolvency Act gives the Court thediscretion to adjudicate Mr Clark bankrupt, and that the Court should not exercise itsdiscretion under s 37 to refuse adjudication.1513 At [22]–[26].14 Affidavit of Wayne Owen Moxham dated 23 June 2022 at [1]–[7].15 Synopsis of submissions by counsel for judgment creditor dated 12 August 2022 at [1]–[8].[20] Mr Mason says District Court judgment underlying the creditor's applicationhas not been appealed and no application has been made for its recall. He saysMr Clark's argument was always going to be difficult to sustain: Mr Clark has neversuggested that he is not the Stephen Clark identified by the New Zealand Police as theholder of the relevant bank account. Mr Clark in fact acknowledges he held theaccount but denies he controlled it.16[21] Of the District Court proceeding, Mr Mason says it concerned astraightforward mistaken payment into Mr Clark's bank account where no reason wasraised not to order restitution. He submits it was inevitable that judgment would begiven in favour of Moxham. This, then, is not a case where it would be unjust andinequitable to make the adjudication order. Mr Clark has done no more than raiseinconsistent and meritless reasons for suggesting the District Court judgment waswrong in law.17[22] Finally, Mr Mason notes that Mr Clark evidently has some assets. Theinvestigation that would follow adjudication may uncover further assets. He submitsthat because Mr Clark has been active in trade, the disqualifications that go withbankruptcy would be appropriate. He says, too, that there is a wider public interest atstake: commerce will be affected where ordinary trading debts become too expensiveto pursue. Adjudication is the only appropriate course.18Mr Clark's submissions[23] Mr Clark, representing himself, submits that all documents written in responseto Moxham's demand letter of 18 April 2019 were written by the controller ofEcoFarm Aotearoa Ltd. He says Mr Mason was advised details of the identity of thecontroller of that company on 26 April 2019. He submits the bank account that thefunds were paid into on 21 June 2018 was a trading account for EcoFarm AotearoaLtd, an entity that was and is not owned, controlled or managed by him. He submitsthat despite Mr Mason having been "notified of the facts pertaining to the ownership16 At [11]–[12].17 At [32]–[34].18 At [35]–[41].and control of the bank account the Judgement Creditor continued to directproceedings against the judgement debtor".19[24] Mr Clark says EcoFarm Aotearoa alone was in receipt of the misdirected funds.As an agent for Nga Tikanga Māori Law Society (NTMLS), he did not have authorityto make any decisions relating to the payment and did not make any decisions relatingto the payment. He was never in possession of the funds and could not therefore refusepayment to Moxham — sole authority to do so was and is held by the controller. Hesubmits an adjudication would result in an unjust bankruptcy of a person that is beingfalsely held to account for monies that are unrelated to that person. He requests thatMoxham's adjudication application be declined and the District Court decision be sentback for remedy. He asks for all court orders made against him to be revoked.20Legal principles[25] The principal requirements for court adjudication on a creditor's applicationare in s 13 of the Insolvency Act 2006 (the Act):13 When creditor may apply for debtor's adjudicationA 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 morecreditors 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 theperiod of 3 months before filing the application; and(c) the debt is a certain amount; and(d) the debt is payable either immediately or at a date in the futurethat is certain.[26] Briefly stated, a creditor may bring a bankruptcy proceeding against a debtorwho owes that creditor at least $1,000 and who has committed an act of bankruptcywithin three months before the filing of the application. The sum must be a "certainamount" and payable immediately or at a future date that is certain.19 Synopsis of submissions by Stephen George Gibson Clark dated 17 August 2022 at [1]–[9].20 At [16]–[25].[27] There are further relevant provisions in pt 2. Section 17 provides that a debtorcommits an act of bankruptcy if:(a) a creditor has obtained a final judgment or a final order against thedebtor for any amount;(b) execution of the judgment or order has not been halted by a court;(c) the debtor has been served with a bankruptcy notice; and(d) the debtor has not, within the relevant time limit, complied with therequirements of the notice or satisfied the court that he or she has across claim against the creditor.[28] When hearing a creditor's application, a court may, among other things,adjudicate the debtor bankrupt if the creditor has established the s 13 requirements;21refuse to adjudicate the debtor bankrupt if those requirements are not established, orif the debtor is able to pay his or her debts, or if it is just and equitable that the Courtdoes not make an order of adjudication, or for any other reason;22 or halt theapplication for adjudication.23[29] The Court may also halt or refuse the creditor's application for adjudication ifthe debtor has appealed against the judgment or order underlying the bankruptcynotice and that appeal is still to be decided.24Analysis[30] The issues to be determined in this judgment are:(a) Are the requirements of s 13 of the Act satisfied?21 Insolvency Act 2006, s 36.22 Section 37.23 Section 38.24 Section 42.(b) If so, are there grounds under s 37 of the Act upon which the Courtshould exercise its discretion not to make the adjudication order?[31] I deal with each of these issues in turn.Are the requirements of s 13 of the Act satisfied?[32] It is clear that they are:(a) Mr Clark owes Moxham more than $1,000;(b) there is an act of bankruptcy within a period of three months beforefiling the application; and(c) the debt is of a certain amount and the debt is immediately payable.Are there grounds under s 37 of the Act upon which the Court should exercise itsdiscretion not to make the adjudication order?[33] Mr Mason submitted that the District Court judgment on which the bankruptcynotice and the application for adjudication is based has not been appealed, and noapplication has been made for recall of the judgment. He submits that the bankruptcyCourt may at times look behind a judgment and the Court will do so more readilywhere there is a default judgment, rather than one that has gone to trial and where therehas been a hearing on the merits.25[34] Where there has been a hearing on the merits, it will be much more difficult topersuade a Court to look behind a judgment. Mr Mason refers to Corney v Bryan,26where Fullagar J indicated the Court would look behind a judgment after a trial on themerits only where there was a prima facie case of fraud or collusion or a miscarriageof justice. Mr Mason submits that in Mr Clark's case there was a determination on themerits after Mr Clark had two opportunities to raise any matters.25 Re Reynolds ex parte Bartletts [2014] NZHC 447 at [26].26 Corney v Bryan (1951) 84 CLR 343 at 356–358.[35] In my view, the present case does not fit into any of the categories justifyinglooking behind the District Court judgment, and that alone would indicate a decisionshould be given in Moxham's favour. However, in case I am wrong on this point,I will continue on to deal with the further submissions made by counsel on behalf ofMoxham and submissions made by Mr Clark.[36] Mr Mason submits that Mr Clark has never suggested that he is notStephen Clark identified by the Police as the holder of the bank account into whichthe payment was made. In fact, Mr Clark acknowledges he held the account but denieshe had control of it. Mr Clark says:(a) He was the agent for NTMLS and did not have authority to make anydecisions relating to the payment.27 In the District Court, Mr Clarkmade the following statement: "Stephen George Gibson Clark is anagent for Nga Tikanga Māori Law Society (Inc) Aotearoa (NZ) theinternal and external sovereign Aotearoa (NZ) Ltd." He says that theaccount of "S Clark, trading as EcoFarm Ltd, was under the control ofNTMLS as a vested business of the Sovereign".(b) A company called EcoFarm Supplies Ltd (renamed EcoFarm AotearoaLtd) acquired full administrative control, including control of thefinances and the bank account, on 2 May 2018, and that all financialtransactions from 2 May 2018 were conducted by the administrator ofEcoFarm Supplies Ltd.28(c) The funds were transferred on 26 June 2018 in accordance withinstructions of the administrator of EcoFarm Aotearoa Ltd.[37] Mr Mason submits that the bank statements supplied by Mr Clark show thatthe $26,509.80 was paid into the S Clark t/a EcoFarm Aotearoa account on 21 June2018, and subsequently $20,000 was paid to "EcoAotearoa BNZ" with a coding of"Redirect Mox" on 26 June 2018. Mr Mason makes the point that not all of the27 Affidavit of Stephen George Gibson Clark dated 22 April 2022 at [9]; and affidavit of StephenGeorge Gibson Clark dated 30 May 2022 at [14].28 Affidavit of Stephen George Gibson Clark dated 22 April 2022 at [2].$26,509.80 was transferred into the EcoFarm trust account. Mr Clark's explanationof what happened to the balance of the $26,509.80 given by him at the hearing wasthat it was used to pay other EcoFarm Aotearoa creditors at the direction of thecontroller of the account.[38] Mr Mason submits that the evidence of Mr Clark on control of the relevantbank account has, at the least, been inconsistent — originally Mr Clark claimed theamount was controlled by NTMLS and then subsequently by EcoFarm Aotearoa.Mr Mason is asking the Court to draw adverse inferences on the credibility ofMr Clark's evidence from these inconsistencies.[39] Subsequent to the hearing, Mr Clark filed an affidavit sworn by Mick Gerritsenin support of his evidence. I summarise the affidavit made by Mr Gerritsen. Hedeposes:(a) That he entered into a contract with EcoFarm SuppliesLimited/EcoFarm Aotearoa Ltd to manage the financial administrationof the company from 1 April 2018.(b) From 25 May 2018, a BNZ trading account was set up to replace theANZ Bank account 'S Clark t/a EcoFarm Aotearoa' as the EcoFarm Ltdtrading account.(c) EcoFarm Aotearoa had control of the transition from the ANZ accountS Clark t/a EcoFarm Aotearoa to the EcoFarm Ltd Aotearoa BNZtrading account, and could control its directions.(d) The bank account EcoFarm Aotearoa BNZ that is identified in thetransaction dated 26 June 2018 (recorded on the S Clark t/a EcoFarmAotearoa account bank statement) was, at the time, the BNZ tradingaccount for EcoFarm Aotearoa Ltd.(e) Mr Clark notified EcoFarm Aotearoa Ltd that $26,509.80 wasdeposited in the S Clark t/a EcoFarm Aotearoa account on 26 June2018.(f) Mr Clark was instructed to transfer $20,000 of the funds to the EcoFarmAotearoa BNZ account in accordance with the direction of thecontroller of EcoFarm Aotearoa Ltd.(g) From 1 April 2018, Mr Clark did not have any involvement in theadministration of EcoFarm Aotearoa and, to the best of Mr Gerritsen'sknowledge, did not have authority with regard to the S Clark t/aEcoFarm Aotearoa bank account.[40] My conclusions on this point are:(a) Subject to the discussion below on Mr Clark's liability as an agent (onwhich I conclude he remains liable), the issue of who may ultimatelycontrol the account is not relevant to the liability of Mr Clark forrepayment of the money. The fact that a third party may have instructedhim to pay the funds elsewhere does not relieve him from responsibilityof repaying money had and received. While Mr Clark may have beenbadly used by a third party, this does not relieve him from personalliability for repayment of the money.(b) There is no evidence before the Court as to transfer of the remainder ofthe $25,000 to other suppliers of EcoFarms Aotearoa Ltd. The Court istherefore unable to make any judgment as to whether the statementfrom Mr Clark that these payments went to other suppliers of EcoFarmAotearoa Ltd is correct.Does Mr Clark have a defence being an agent?[41] In supplementary submissions dated 23 August 2022, Mr Mason dealt with theissue of whether Mr Clark may have a defence as an agent. He referred the Court tothe following passage from Laws of New Zealand:29The agent's receipt of money from a third party on the principal's behalf doesnot itself render the agent liable to repay it when the third party becomesentitled to repayment from the principal, whether the money remains in thehands of the agent or not. The agent is, however, liable personally to repay itif a third party has paid the money to him or her under a mistake or fact, or inconsequence of some wrongful act. However, if before the claim forrepayment is made the agent has paid it, or has done something equivalent topaying it, to the principal, and this has so prejudiced the agent's position thatit would be inequitable to require him or her to refund it, the agent will not beliable.[42] Mr Mason contends that this statement is an over-simplification of the law andrefers to ANZ Group Ltd v Westpac Banking Corp, where the High Court of Australiasaid:30 on balance, both authority and principle support the conclusion that anagent who has received money on his principal's behalf will, without more,have a good defence if, before learning the money was paid under fundamentalmistake, he has "paid it to the principal or done something equivalent" thereto The rationale of such a general rule can be identified in terms of the law ofagency and of notions of unjust enrichment. If the money is paid to an agenton behalf of the principal and the agent receives it in his capacity as such and,without notice of any mistake or irregularity in the payment, applies themoney for the purpose for which it was paid to him, he has applied it inaccordance with the mandate of the payer who must look to the principal forrecovery .[43] Mr Mason submits that in the present case Mr Clark never received the moneyas an agent for a principal. Mr Mason submits it was not paid to Mr Clark by Moxhamas agent for Ecofarm Aotearoa but was instead received by him with notice ofirregularity of the payment from the start. Accordingly, in those circumstances,Mr Mason submits that Mr Clark is personally liable to repay the money.29 C Hawes and D Lester Laws of New Zealand Agency: Money Received by Agent (online ed) at[144] (footnotes omitted).30 ANZ Group Ltd v Westpac Banking Corp (1987) 164 CLR 662 at 681–682 (citations omitted).Mr Clark's circumstances and the public interest[44] Mr Mason submits that Mr Clark says that he has no assets other than apersonal bank account with $8,904.62. Mr Mason refers to Eide v Colonial MutualLife Assurance Society Ltd,31 where the Court recognised that even the undoubtedabsence of assets will not necessarily preclude an order, for the circumstances may besuch that the debtor ought, in the public interest, to be visited with the disqualificationsthat go with bankruptcy.[45] Mr Mason submits that Mr Clark has some assets and the investigation of hisassets that would follow adjudication is desirable, as it may uncover further assets.Mr Mason further submits that the rapid retrieval of funds paid under a mistake is inthe public interest of the commercial community. In that sense, it is in the publicinterest that an adjudication order be made.Conclusions[46] In my view:(a) There are not sufficient grounds to look behind the District Courtjudgment, which was a trial on the merits. Mr Clark did not appeal thatjudgment or seek to set it aside. In addition, Mr Clark did not seek toset aside the bankruptcy notice.(b) While the ultimate control of the account into which the funds weremistakenly paid is unclear, this does not relieve Mr Clark from personalresponsibility for repayment of monies paid under a fundamentalmistake. While he may have been badly used by third parties, hispersonal liability to repay the funds remains.(c) Mr Clark cannot avail himself of the defence of being an agent, as thepayment was not made to him as an agent for EcoFarm Aotearoa andhe had notice of the mistake when the funds were received into theaccount.31 Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (HC) at 635.(d) While Mr Clark's declared position is that he may not have many assets,an investigation into his assets would be beneficial.(e) There is public interest for the commercial community in the assurancefrom the courts of recoverability of money paid under a fundamentalmistake.Result[47] I order that the defendant, Steven George Gibson Clark is adjudicated bankruptat 3:00pm on 20 October 2022...Associate Judge Taylor