THE OFFICIAL TRUSTEE IN BANKRUPTCY as Trustee of the Bankrupt Estate of Pinehuia Mary Josephine Henare v HENARE [2019] NZHC 248

THE OFFICIAL TRUSTEE IN BANKRUPTCY as Trustee of the Bankrupt Estate of Pinehuia Mary JosephineHenare v HENARE [2019] NZHC 248 [25 February 2019]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV 2018-419-000357[2019] NZHC 248UNDER The Insolvency (Cross-border) Act 2006AND UNDER The High Court RulesIN THE MATTER Of an application pursuant to Schedule 1, Chapter III,Article 15 and rules 24.56, 24.57 and 18.7 of the RulesBETWEEN THE OFFICIAL TRUSTEE IN BANKRUPTCY asTrustee of the Bankrupt Estate of Pinehuia MaryJosephine HenareApplicantAND PINEHUIA MARY JOSEPHINE HENARERespondentHearing: On the papersJudgment: 25 February 2019JUDGMENT OF VAN BOHEMEN JThis judgment was delivered by me on 25 February 2019 at 12.30pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:J MacGillivrayTompkins Wake, HamiltonIntroduction[1] On 15 November 2018 the Official Trustee in Bankruptcy of Australia, astrustee of the bankrupt estate of Ms Pinehuia Mary Josephine Henare, applied pursuantto the Insolvency (Cross-border) Act 2006 and the High Court Rules 2016 forrecognition of the bankruptcy of Ms Henare in Australia as a foreign main proceedingand for related orders. For reasons that are not apparent to me, the application was notput before a judge until late January 2019. Whatever the reasons, this delay shouldnot have occurred.Relevant Background[2] Ms Henare was born in New Zealand and possesses a New Zealand passport,but has resided in and been employed in Western Australia for some time. On 8 June2018, Ms Henare filed a Debtor's Petition in Australia pursuant to the Bankruptcy Act1966 and was subsequently declared bankrupt by the Australian Financial SecurityAuthority.[3] The Debtor's Petition filed by Ms Henare contained a declaration of her assets,including a property located in Kawerau, New Zealand (the Kawerau Property). TheKawerau Property had been jointly owned by Ms Henare and her late husband MrRoger Rota Brown. Upon Mr Brown's death, his share in the Kawerau Property wasleft to Ms Henare, resulting in her sole ownership of the property.[4] Following Ms Henare's bankruptcy, by operation of the Australian BankruptcyAct 1966 the Official Trustee in Bankruptcy was appointed trustee of the estate of MsHenare, vesting Ms Henare's assets including the Kawerau Property, in the applicant.The applicant seeks various orders to facilitate dealing with the Kawerau Property.Application[5] Pursuant to the Insolvency (Cross-border) Act 2006 (the Act) and the HighCourt Rules 2016, the applicant seeks orders:(a) That the Australian Bankruptcy be recognised as a foreign mainproceeding;(b) That the application may proceed without service on Ms Henare;(c) That the administration of Ms Henare's New Zealand assets beentrusted to Joanne Margaret McCarthy (Official Assignee);(d) That the applicant notifies Ms Henare of her right to modify orterminate the recognition of her bankruptcy as a foreign mainproceeding;(e) Granting leave to serve any orders made by the Court outside ofNew Zealand; and(f) That any order made by this Court be served as soon as possible on MsHenare.Application to Proceed Without ServiceApplicant's Submissions[6] The Official Trustee has applied for recognition of the Australian Bankruptcyas a foreign proceeding by way of originating application, as required under r 24.56(1)of the High Court Rules. The first question that requires determination is service ofthe proceeding.[7] Currently, no other person has been served with notice of the proceeding, andthe applicant submits that, in accordance with r 24.56(2)(b), the application shouldproceed without service. The applicant further seeks directions as to service underr 18.7, as required by r 24.57(2).[8] The applicant submits that the following circumstances are relevant to thedetermination of whether the application should proceed without service onMs Henare:(a) Rule 24.57 does not expect immediate service on the debtor; insteadthis rule requires an application for directions as to service be madewithin 25 days of the date of filing the recognition application.(b) Under the Act an application for recognition of a foreign proceedingshould be decided at the earliest possible time,1 and given the strengthof the current application, it should not be delayed by service onMs Henare.(c) Service would have to be effected in Western Australia and theapplicant is unaware of any New Zealand agent or representative.(d) If Ms Henare were to oppose the application she would be in breach ofher obligation under the Australian Bankruptcy Act 1966 to assist withthe administration of her estate.(e) Service was dispensed with in a previous case with similarcircumstances.2Analysis[9] The determination of whether the current application should proceed withoutservice on Ms Henare is governed by r 24.56(2)(b) of the High Court Rules 2016. Thedefault position under the rule is that the application is to be served in accordance withPart 6 of the High Court Rules. However, an application may proceed without servicewhere the Judge directs that in all the circumstances service should be dispensed with.The Rules provide no further specification as to what constitutes all the circumstances.[10] In Official Trustee in Bankruptcy v Smith, Bell AJ stated that in considering anapplication under r 24.56(2)(b) the court must have regard to:3(a) The just, speedy and inexpensive determination of proceedings under r1.2; and(b) Whether the application is one that can be properly determined withoutnotice under r 7.46(3).1 Insolvency (Cross-Border) Act 2006, sch 1, ch III, art 17(3).2 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305.3 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [11].[11] Bell AJ identified the circumstances where it would be appropriate, with regardto r 1.2, to dispense with service, namely, where the respondent has consented to theapplication, or where the debtor has gone to grounds, rendering service futile.4[12] In the present case, there is no indication that Ms Henare consents to theapplication, or that she is even aware of it. There is also no evidence that Ms Henarehas gone to ground. Rather, the applicant has provided her address and requested thatany orders made by this court, be served on Ms Henare as soon as possible.[13] I also do not accept that the requirement that a recognition application bedecided at the earliest possible time requires the Court to dispense with service. Thisargument was not accepted in Official Trustee in Bankruptcy v Smith where Bell AJemphasised that the Act ought to be read consistently with the principles of naturaljustice.5[14] The suggestion that service should be dispensed with because service wouldhave to be effected in Western Australia and the applicant is unaware of any NewZealand agent or representative is peculiar. The applicant is an Australian federalentity and presumably operates across the whole of Australia. There are also manyprocess servers in Australia. While Western Australia may be some distance from NewZealand, given the links between the two countries, distance can hardly be a reasonfor dispensing with service. The fact that Ms Henare may not have an agent orrepresentative in New Zealand upon whom the application can be served does notaffect these considerations.[15] Whether or not Ms Henare would be in breach of her responsibilities under theAustralian Bankruptcy Act if she opposed the application is not an adequate reason fornot informing her of the application.[16] Rule 24.56 does not provide that service may be dispensed with solely in theinterests of expediency. Rather, the rule envisages consideration of all the relevant4 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [12].5 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [13].circumstances, including whether the case is one that can be properly determinedwithout notice under r 7.46(3).[17] Rule 7.46(3) provides that:(3) The Judge may determine that an application can properly be dealt withwithout notice only if the Judge is satisfied that—(a) requiring the applicant to proceed on notice would cause unduedelay or prejudice to the applicant; or(b) the application affects only the applicant; or(c) the application relates to a routine matter; or(d) an enactment expressly permits the application to be madewithout serving notice of the application; or(e) the interests of justice require the application to be determinedwithout serving notice of the application[18] None of the factors outlined in r 7.46(3) applies:(a) There is no indication that there would be any difficulty in servingMs Henare with this application. To the contrary, the applicant iswilling to serve any orders made by this Court on the debtor as soon aspossible. I do not accept that to require service would cause unduedelay or prejudice.(b) The application cannot be said to affect only the applicant. Ms Henarewill also be affected as the orders sought will vest the Kawerau Propertyin the Official Trustee. The application will also affect ANZWhakatane which has a security interest in the Kawerau property byway of mortgage.(c) The matter goes to the recognition of a foreign proceeding and theenforcement of a foreign bankruptcy order and as such is not a routinematter.6(d) Subparagraph (d) does not apply.(e) In my view, the interests of justice do not require the application bedetermined without notice.[19] Despite the absence of the factors listed in r 7.46(3), the applicant correctlysubmits that there is a strong case for recognition of the foreign proceeding.Furthermore, as Bell AJ observed in Official Trustee in Bankruptcy v Smith, relationsbetween New Zealand and Australia are close and the two countries have greatconfidence in each other's legal system. Bell AJ considered that these factors meantthat there would be little injustice in allowing immediate recognition of an Australianbankruptcy order while reserving the right to apply later to challenge that recognition.7For that reason, Bell AJ adopted a 'middle path' of allowing the order to proceedwithout service while extending the time to apply to review the order under r 2.3 ofthe High Court Rules.8[20] Rule 2.3 of the High Court Rules 2016 has since been repealed so the middlepath adopted by Bell AJ is no longer available. The applicant submits, however, thatit would still be open to Ms Henare to challenge recognition of the bankruptcy underArticle 17(5) of Schedule 1 of the Act which, as Bell AJ noted, operates in addition tothe right to review under r 2.3.9 The applicant submits that the Court should directthat the application proceed without service but, in order to preserve Ms Henare'sposition the Court should also direct that the order recognising the foreign proceedingbe served as soon as possible and that her rights under Article 17(5) be brought to herattention.6 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [13].7 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [14].8 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [15].9 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [16].[21] The difficulty is that the right to apply under Article 17 does not place a debtorin the same position as he or she would have been if served with the proceedings.Service allows a debtor to oppose or consent to an order and to bring to the Court'sattention matters that the debtor may consider relevant. However, to succeed with anorder for modification or termination a debtor must show that the grounds for grantingthe order were fully or partially lacking, or that they now cease to exist. That is aconsiderably more difficult threshold to satisfy.[22] Furthermore, Official Trustee in Bankruptcy v Smith and this case show thatthere are likely to be future occasions where there will be applications for recognitionof Australian bankruptcy orders in New Zealand. I consider it undesirable to establisha practice that such applications proceed without notice in the absence of specificcircumstances of the kind identified in r 7.46(3).[23] Accordingly, I consider that the current application is not one that shouldproperly be determined without notice and I decline to direct that service be dispensedwith.Service of the recognition application on Ms Henare in Australia[24] While an application for recognition of a foreign proceeding in New Zealandwould ordinarily be a "civil proceeding", the present application would appear to beexcluded from the application of s 12 the Trans-Tasman Proceedings Act 2010 byclause 4 of the Trans-Tasman Proceedings (Specified Australian InsolvencyJudgments Excluded from Recognition or Enforcement in New Zealand and ExcludedMatter) Order 2013. Accordingly, leave is required under r 6.30.[25] Leave to serve the application on Ms Henare is granted. In the alternative, Ileave it open to the applicant to obtain the consent of the debtor to the application byway of affidavit, in which case the Court will dispense with service of the applicationon Ms Henare.Other Interested Parties[26] The material filed with the application indicates that the ANZ branch inWhakatane has a security interest in the Kawerau Property by way of mortgage. 10 Iconsider that, in accordance with r 18.8, the application for recognition should also beserved on ANZ Whakatane as an interested party.Other Orders[27] I adjourn consideration of the other orders sought pending resolution of theissue of service.Result[28] Accordingly:(a) I decline the application to dispense with service on Ms Henare of theapplication for recognition of Ms Henare's bankruptcy in Australia as aforeign main proceeding;(b) I grant leave to serve the application for recognition of Ms Henare'sbankruptcy in Australia as a foreign main proceeding on Ms Henare;(c) I reserve leave to re-apply to dispense with service of the applicationon Ms Henare upon the filing of evidence of Ms Henare's consent tothe application;(d) I direct that the application for recognition of Ms Henare's bankruptcyin Australia as a foreign main proceeding be served on the ANZ Bankin Whakatane as an interested party;10 Whittman v UCI Holdings Ltd [2016] NZHC 1754. In determining whether a recognitionapplication should succeed emphasis was placed on the fact that the creditors had been servedwith proceedings and did not oppose them.(e) I adjourn the determination of the further orders sought until theapplication has been served on Ms Henare or Ms Henare's consent tothe application has been obtained______________________G J van Bohemen J