OFFICIAL ASSIGNEE V CHURTON HC WANG CIV-2005-483-256

OFFICIAL ASSIGNEE V CHURTON HC WANG CIV-2005-483-256 15 June 2006IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY CIV-2005-483-256 B87/99IN THE MATTER OF s 140 of the Property Law Act 1952 BETWEEN THE OFFICIAL ASSIGNEE Plaintiff AND MIRIA CHRISTINE CHURTON DefendantB87/99BETWEEN RANGIPO METEKING, BRENDON TE TIWHA JAMES PUKETAPU, HOANI WIREMU HIPANGA as Trustees of the MANGAPOROU TRUST Judgment Creditor AND DAVID WAYNE CHURTON Judgment Debtor Hearing: 14 June 2006 Appearances: J G Krebs for Plaintiff No appearance for Defendant, Mrs M C Churton M K Mahuika for Judgment Debtor, Mr D W Churton Judgment: 15 June 2006JUDGMENT OF ASSOCIATE JUDGE D I GENDALL Introduction[1] On 25 September 2000 David Wayne Churton ("Mr Churton") was adjudicated bankrupt in this Court.[2] On 21 August 2002 a conditional order annulling the bankruptcy of Mr Churton was made in the following terms:1. By consent an order is made annulling the bankruptcy of David Wayne Churton. 2. This order is to lie in court and not be sealed until the Court receives a memorandum from the Official Assignee to confirm the necessary steps are taken for: (a) the transfer of a number of properties out of Mr Churton's name; (b) confirmation that creditors have been paid out of the funds available. 3. Costs are awarded to the Official Assignee on a 2B basis plus disbursements as fixed by the Registrar.[3] The Official Assignee has not provided the confirmation referred to in paragraph (2) of the order noted in the preceding paragraph. On the contrary, counsel for the Official Assignee advises that the Official Assignee has accepted a proof of debt from the Inland Revenue Department ("IRD") as a major creditor of Mr Churton for approximately $130,000 and that this and other debts remain outstanding. [4] Mr Churton however apparently disputes that this IRD debt is owing by him and according to the Official Assignee, Mr Churton has vigorously pursued a course of action to frustrate the Official Assignee in realising his share in certain assets to clear outstanding debts and finalise the bankruptcy. [5] Included in these assets is a one-half share in a farm property near Wanganui which Mr Churton owned in equal shares with his wife, Miria Christine Churton ("Mrs Churton"). [6] Mr Churton's one-half share in this farm property was apparently transmitted to the Official Assignee some time ago. In order to prosecute the sale of the property an application for an order under s 140 Property Law Act 1952 was brought by the Official Assignee and on 19 October 2005 this Court granted the order for sale.[7] The Official Assignee states that since that time he has made efforts to have the farm property valued and marketed for sale but that these have been met by considerable resistance on the part of the Churtons. [8] Matters with respect to the farm property have apparently reached a form of stalemate because of a claim by Mr Churton that his bankruptcy has been annulled – hence the present application by the Official Assignee, which is to have the conditional annulment order dated 21 August 2002 recalled. [9] The Official Assignee explains that his administration of Mr Churton's bankruptcy is considerably frustrated at present by Mr Churton's argument that the bankruptcy has been annulled. [10] The Official Assignee contends that this frustration affects his ability to realise a major asset in the bankruptcy, being Mr Churton's one-half share in the farm property. In turn this impacts upon the Official Assignee's ability to conclude the administration of Mr Churton's bankruptcy. Finally, the Official Assignee argues that the continued existence of the conditional order is a circumstance which necessarily therefore impedes the administration of justice. [11] The present application for an order recalling the conditional annulment is opposed by Mr Churton. Although it may have little relevance to the present application, there was no appearance before me on behalf of Mrs Churton.Counsel's argument and my decision[12] Rule 542 High Court Rules applies here. This rule states:(1) A judgment takes effect when it is given. (2) Unless the Judge otherwise directs, no step may be taken on a judgment before it has been sealed. (3) A judgment, whether given orally or in writing may be recalled by the Judge at any time before a formal record of it has been drawn up and sealed.(4) A party may bring an appeal under Rule 7 of the Court of Appeal (Civil) Rules 1997 even though the judgment appealed against has not been sealed, as long as the party takes steps to ensure that the judgment is sealed promptly after the appeal is brought. (5) In this rule – (a) subclause (2) overrides subclause (1): (b) subclause (4) overrides subclause (2).[13] It is clear from Rule 542 that a judgment takes effect when it is given. At best, as I see it, from Mr Churton's point of view, the effect of this subclause in the present case is simply that the 21 August 2002 conditional annulment order takes effect as a judgment at that time but it must take effect only as a conditional judgment and not as a final sealed judgment. [14] Seeing this argument through to its logical conclusion, the 21 August 2002 court order in terms of the condition contained in paragraph (2) was to lie in Court and not be sealed until the Official Assignee confirmed both the transfer of properties out of Mr Churton's name and that his creditors had been paid out of the funds available. As I have noted, no such confirmation has ever been given and indeed counsel for the Official Assignee states that, in terms of the impasse which now appears to have developed, there is little likelihood that the Official Assignee would be able to provide the confirmation needed to satisfy these conditions in the future. [15] Turning now to consider subclause (2) of Rule 542, this subclause in any event overrides subclause (1) by the effect of subclause (5). Subclause (2) directs that no step may be taken on a judgment before it has been sealed. In the present case the conditional annulment judgment or order has not been sealed and cannot be sealed because the conditions set out in the order have not been met. It follows therefore that no step may be taken on the order. Further, it follows that at law, the conditional annulment order can have no impact upon the ongoing administration of Mr Churton's bankruptcy.[16] Turning now to consider Rule 542(3), this rule provides that precisely because the judgment/order has not been sealed it may be recalled. This is what the Official Assignee seeks here. [17] As to recall under rule 542(3) McGechan on Procedure at HR542.04 sets out the principles to be applied in the following way:Cases under the recall rule (r 540(6) until 12 November 2004) have accepted that the common law principles stated by Wild CJ in Horowhenua County v Nash (No 2) [1968] NZLR 632 should be applied to the unfettered discretion given to the Judge under (now) r 542(3). Wild CJ stated, (p 633): "Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled – first where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court's attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled." These principles are equally applicable in the Court of Appeal: Gazley v A-G(1996) 10 PRNZ 47 (CA); Rainbow Corp Ltd v Ryde Holdings Ltd (1992) 5 PRNZ 493, although in the former case Thomas J (dissenting but not on this point) emphasised (at p 61) that "[a]s with the application of all rules of Court, the ultimate criteria must be the administration of justice".[18] In terms of the grounds for recall set out in this decision of Wild CJ, Mr Krebs for the Official Assignee acknowledged before me that the Official Assignee relied only upon the third of the listed grounds, that is that for some other very special reason justice required that the judgment be recalled. [19] As to this Mr Krebs repeated that under the present circumstances here the conditions set out within the 21 August 2002 order could never be satisfied and therefore this order could never be sealed. It followed therefore that no steps confirming an annulment could ever be taken at this point based upon that order. [20] He went on to submit that the existence of the conditional annulment order was confusing and was obstructing the administration of Mr Churton's bankruptcy and that this thereby touched on the interests of justice.[21] In opposition before me, Mr Mahuika for Mr Churton argued two grounds. [22] The first ground was a jurisdictional one. He claimed that there was no jurisdiction for the order to be recalled in terms of the third ground outlined in the decision of Wild CJ in Horowhenua County as there was no reason why justice required that the judgment be recalled here. [23] In my view this argument is quickly disposed of. Rule 542(3) clearly provides a jurisdictional basis for recall of the judgment or order in question under the circumstances prevailing here. Further, the changed circumstances of the parties and the events which have occurred since the order was made on 21 August 2002 in my view provide a clear jurisdictional basis to consider the third ground for recall noted by Wild CJ in Horowhenua County. [24] The second ground upon which Mr Churton opposes the Official Assignee's application was that considering the merits of the parties' positions here, it was not in the interests of justice for the Court to exercise its jurisdiction and to require the judgment or order in question to be recalled. [25] As to this, Mr Mahuika referred me to the minority decision of Thomas J inGazly v A-G. Mr Mahuika referred to the comments of Thomas J at p 61 of that judgment where he stated:Underlying both the rule and these criteria must be the recognition of some significant factor, of which new legislation or a recent authoritative decision would be likely examples, which could have affected the Court's decision or exercise of its discretion in reaching the decision in question.[26] Mr Mahuika argued that at the time the conditional annulment order was made there was no error of law or oversight of any new legislation or recent authoritative decision, nor any fact that would materially have affected the Court's decision to grant the conditional annulment. [27] Mr Mahuika then referred to the decision drawn to the Court's attention earlier by Mr Krebs for the Official Assignee, BNZ v Ngataki HC AK CP394-IM99 10 February 2000. Although Mr Mahuika accepted the submission from Mr Krebsthat the BNZ v Ngataki decision differed from the present situation in that the Court there was dealing with a sealed order rather than as here, an order yet to be sealed, he endeavoured to argue that the decision was informative in that it related to events which arose subsequent to the making of the order. In BNZ v Ngataki the Court held that once sealed there was no jurisdiction to revisit an earlier order made annulling a bankruptcy. [28] As I see the position, the BNZ v Ngataki decision relates to an entirely different situation from that which prevails here. In BNZ v Ngataki the annulment order was clearly an order that had been sealed and therefore no jurisdiction existed to recall the order. That is entirely different from the current situation where the conditional annulment order has never been and could not be finalised by sealing. I distinguish the BNZ v Ngataki case for these reasons. [29] I note also that in drawing my attention to the decision of Thomas J in Gazley v A-G, Mr Mahuika omitted to quote the sentence immediately following the quote noted in [25] above. This sentence provides:As with the application of all rules of Court, the ultimate criteria must be the administration of justice.[30] The principle outlined here is also referred to with favour in McGechan on Procedure HR542.04 which I have referred to at [17] above. [31] Applying this principle to the present situation, there is little doubt in my mind that the overall administration of justice here requires that the conditional annulment order should be recalled in terms of Rule 542(3). [32] This judgment or order as I have noted above is incapable of being perfected as the conditions on which it is made cannot be satisfied. [33] I accept the contentions made by Mr Krebs for the Official Assignee that the continued existence of this conditional annulment order is frustrating the Official Assignee in his administration of the bankrupt's estate. The fact remains the bankruptcy needs to be finalised. On the basis of the material currently before the Court there seems to be little doubt that, given Mr Churton's continuedmisunderstanding and insistence that his bankruptcy has been annulled, a proper finalisation of the administration of his estate is unable to be achieved. [34] As to Mr Churton's complaint that the IRD debt recorded in the filed proof of debt is disputed, this is a matter for Mr Churton to pursue with the Official Assignee. If in the administration of his estate as a bankrupt Mr Churton takes the view that the Official Assignee has acted improperly or paid debts which are not due, then he has the option of considering other remedies which might be open to him in terms of the Insolvency Act 1967. In my view these issues are not relevant however to the matters before the Court in the present application.Conclusion[35] For the reasons I have outlined above, it will be apparent that the application by the Official Assignee for an order recalling the 21 August 2002 conditional annulment order succeeds. [36] An order is now made that the judgment/order noted in [2] above, whereby the bankruptcy of David Wayne Churton was annulled conditional upon satisfaction of the matters outline in paragraph (2) of that order is now recalled. [37] No arguments were put before me as to costs. If costs are in issue then leave is reserved for appropriate memoranda to be filed._______________________ Associate Judge D I GendallSolicitors: Elvidge & Partners, Napier for Plaintiff Kahui Legal, Wellington, for Judgment Debtor Delivered at 4pm on Thursday 15 June 2006.