Bank of New Zealand v Robyn Elizabeth Tiller
| Jurisdiction | New Zealand |
| Judge | Associate Judge Johnston |
| Judgment Date | 09 March 2022 |
| Neutral Citation | [2022] NZHC 396 |
| Docket Number | CIV-2016-485-0596 |
| Court | High Court |
UNDER section 309 of the Insolvency Act 2006
IN THE MATTER of an application for annulment of the bankruptcy adjudication of Robyn Elizabeth Tiller
[2022] NZHC 396
Johnston
CIV-2016-485-0596
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE WHANGANUI-A-TARA ROHE
Commercial — application by the judgment debtor for an annulment of her bankruptcy — substituted service for summary judgment application and bankruptcy adjudication application — application based on the proceedings being irregularly obtained because she did not receive the documentation or have an opportunity to respond to them — Insolvency Act 2006
R Gordon for judgment creditor
P Ross for judgment debtor
D Dingwall for the Official Assignee
The application was dismissed.
This is an application by the judgment debtor, Robyn Tiller, for an annulment of her bankruptcy pursuant to s 309 of the Insolvency Act 2006. The judgment creditor, the Bank of New Zealand, opposes the application. The Official Assignee takes a neutral position. The factual background, whilst somewhat unusual, is not controversial.
Mrs Tiller and her husband, Michael Tiller, were the shareholders and directors of Isabel Estate Vineyard Ltd. The company was formed in the early 1980s. It has since been in receivership and liquidation, and has now been removed from the Register.
By early 2014, the company was facing serious financial difficulties. BNZ, its principal financier, had been monitoring it closely for some time.
In January 2014, PricewaterhouseCoopers carried out an independent analysis of the company's viability. PwC said that the company was insolvent and without refinancing it was hard to see it having a future. Those are my words. However, I think they accurately reflect the terms of the report.
In February 2014, BNZ offered a refinancing package which was taken up by the company. The contemporaneous correspondence confirms that the facility was intended to be a short term one expiring on 30 June 2014, and that both parties were well aware of that.
The company's obligations were guaranteed by Mr and Mrs Tiller.
By mid-2014 the company's indebtedness to the bank stood at more than $12 m, the lion's share of which debt reflected the term loan advanced earlier in the year of over $11 m.
The 30 June 2014 date came and went, and the company did not repay the loan.
There is no suggestion in any of the contemporaneous correspondence that BNZ held out to the Tillers any hope that the loan would be renewed. From a commercial perspective, that is unsurprising, given the history of the relationship between the parties, and the bank's apparent desire to quit the relationship.
To the extent that Mr and Mrs Tiller say in their affidavit evidence that they had anything approaching a justified expectation that the bank would renew, or, as they put it, “roll-over”, the loan on 30 June 2014, I do not accept that.
In April 2014, Mr and Mrs Tiller had travelled to mainland Europe. They say that this was a sales trip. They say that their intention was to be away for six months during which time they hoped to build up the company's customer base.
Upon the expiry of the term of the loan, BNZ wrote to the company and to Mr and Mrs Tiller effectively saying that the bank would move to enforce the debt unless it was repaid. In replying to this correspondence, Mr and Mrs Tiller made it clear that neither the company nor they were in a financial position to repay.
On 1 July 2014, BNZ made demand on the company and on Mr and Mrs Tiller pursuant to their guarantees for the total sum of over $12 m.
On 2 July 2014, BNZ appointed receivers, Mr John Fisk and Mr Richard Long of PwC. Mr and Mrs Tiller acknowledged notification of this saying it was not unexpected and that they would cooperate with the receivers.
Mr and Mrs Tiller returned to New Zealand in August 2014. They vacated their home over which BNZ held a charge soon after their return.
In October 2014 the receivers took steps to sell the company's assets. At the conclusion of that exercise, they calculated that there was a net shortfall of $6,841,065.10.
BNZ looked to Mr and Mrs Tiller in respect of that shortfall. The bank wrote to Mr and Mrs Tiller on 17 October 2014 notifying them of its claim pursuant to their guarantees. By this time, the Tillers had left the country again. They were in Australia. They responded on 23 October 2014. The thrust of their response was to the effect that they were not in a position to meet their obligations to the bank — they said they were not even in a position to buy a cheap second-hand car.
On 19 January 2016, BNZ commenced summary judgment proceedings against Mr and Mrs Tiller. It applied for and obtained an order for substituted service. This was made by Associate Judge Osborne (as Osborne J then was) on 8 April 2016. This order required the bank to effect service by emailing copies of the originating documentation to an email address (timmertravel@gmail.com) and serve the same on the defendant's daughter, Jane Tiller, at her home in Blenheim.
BNZ served the originating documentation pursuant to that order. The Tillers took no steps in the proceeding. Summary judgment was entered by default in the bank's favour against the Tillers jointly and severally on 14 June 2016, resulting in a judgment debt of $6,841,065.10.
BNZ initiated bankruptcy proceedings.
An order for substituted service was sought and made by Associate Judge Smith on 16 August 2016. This order applied both to any bankruptcy notices and the originating documentation in any bankruptcy proceedings. It was in the same terms as the previous order.
BNZ served the bankruptcy notices pursuant to that order. The Tillers took no steps.
Following the expiration of the period for compliance with the bankruptcy notices, BNZ issued bankruptcy proceedings. The bank served the originating documentation pursuant to the Court's earlier order. Again, the Tillers took no steps.
The bankruptcy proceedings came on for hearing before Associate Judge Smith on 29 November 2016 and the judge made orders adjudicating both Mr and Mrs Tiller bankrupt.
Following their adjudications, Mr and Mrs Tiller filed statements of their affairs.
Mr and Mrs Tiller were both discharged from bankruptcy on 14 December 2019.
Now, five years after her adjudication, and two years after her discharge, Mrs Tiller applies for an annulment. The bank's judgment debt remains unpaid.
On behalf of BNZ, Mr Gordon submits that it is clear what is behind Mrs Tiller's application. During her bankruptcy, Mrs Tiller purchased and developed a residential property in Waipawa. The Official Assignee later determined that the property formed part of her bankrupt estate. Mrs Tiller appealed from that determination. On 22 July 2021, Grice J delivered a judgment dismissing the appeal. 1 Shortly after this, Mrs Tiller filed this application. In it, for the first time, as far as I can discern, Mrs Tiller says that she was not served with the originating documentation in the summary judgment proceeding, the bankruptcy notice or the originating documentation in the bankruptcy proceeding, and therefore had no opportunity to respond to them.
Section 309(1) provides that the Court may annul adjudications in bankruptcy in several circumstances. The only aspect of the provision that could possibly apply here is sub-para (a) entitling the Court to annul an adjudication if it considers that the bankrupt should not have been adjudicated bankrupt in the first place.
Annulment is a power seldom used, and application for annulment is not an opportunity for the applicant to challenge the debt on which the bankruptcy was based, or re-litigate the substance of the adjudication. 2 The right to challenge the judgment upon which an adjudication order is based rests with the Official Assignee. 3 In addition, the need to promote commercial certainty means the courts do not look favourably on applications following significant delay. 4 However, an application for annulment is not barred automatically by the fact that the bankrupt has already been discharged. 5
The argument advanced on Mrs Tiller's behalf by Mr Ross is that she should not have been adjudicated bankrupt because she did not receive the originating documentation in the proceeding in which judgment was obtained, the bankruptcy
In dealing with matters such as applications to set aside judgments obtained by default, the law distinguishes between judgments obtained irregularly and regularly. In the case of the former, once it is established that the judgment was obtained irregularly, that is an end of the matter. The judgment debtor is entitled to have the judgment set aside ex debito jusitiae — as of right. 6 In the case of the latter, the Court will consider whether there is any explanation for the defendant, respondent or other party failing to take whatever steps were available and — significantly — whether the Court is satisfied that there was a reasonably arguable defence available. 7
As I understood Mr Ross' submissions on behalf of Mrs Tiller, it proceeded on the basis that the summary judgment in this case was obtained irregularly because she did not receive the originating documentation. He contended that the Court should not look beyond that. He said that the same argument applied to the...
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