Carters v Cancian
| Jurisdiction | New Zealand |
| Judge | Associate Judge Sussock |
| Judgment Date | 29 July 2022 |
| Neutral Citation | [2022] NZHC 1862 |
| Docket Number | CIV-2021-470-57 |
| Court | High Court |
IN THE MATTER of the Insolvency Act 2006
AND
IN THE MATTER of the bankruptcy of DANNY JOHN CANCIAN
[2022] NZHC 1862
Associate Judge Sussock
CIV-2021-470-57
IN THE HIGH COURT OF NEW ZEALAND
TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TAURANGA MOANA ROHE
Commercial, Insolvency — application to halt bankruptcy proceedings — legal principles regarding necessary elements for adjudication — Insolvency Act 2006
PJ Morris for the Judgment Creditor
DJ Cancian, Judgment Debtor in person
This judgment was delivered by me on 29 July 2022 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Carters has applied to adjudicate Mr Cancian bankrupt relying on a failure to pay a High Court judgment in Carters' favour for $1,078,668.23.( 1)
Mr Cancian appealed the High Court decision, but the Court of Appeal dismissed Mr Cancian's appeal on 24 August 2021.( 2)
Mr Cancian opposes Carters' application and seeks a halt of the bankruptcy proceedings. This is to allow him to seek legal advice (and potentially legal aid) to bring civil proceedings against the Tauranga City Council and to appeal his remaining convictions to the Court of Appeal.
Mr Cancian says he has no assets and so there is no benefit for Carters in immediately bankrupting him. He says he has the support of several creditors and that if the bankruptcy proceedings are halted, he presents no threat, risk or otherwise to the community or the business community as he is unable to operate. If he does not proceed with legal proceedings, Mr Cancian says he will not oppose bankruptcy orders being made.
Carters submits in response that it has been involved in litigation with Mr Cancian for over four years now and that it is time for the Official Assignee to investigate Mr Cancian's estate and to give Carters finality.
Carters submits that Mr Cancian has not satisfied the Court that either it is just and equitable not to make an order for adjudication or that there is some other sufficient reason for the Court not to make an order.
Furthermore, Carters says there are no valid reasons for the Court to halt Carter's application as any action in defamation is still able to proceed and the Official Assignee could bring proceedings on Mr Cancian's behalf or assign the right to bring proceedings to Mr Cancian if that is appropriate.
The issues are:
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(a) Has Carters proved a prima facie case for adjudication?
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(b) Is there any reason not to adjudicate or to halt the adjudication?
The debt on which Carters' bankruptcy application is based, arises out of a personal guarantee given by Mr Cancian over the obligations of Bella Vista Homes Ltd (in liquidation) for building supplies purchased on a trade account with Carters. The trade account and guarantee were entered into on 12 October 2016.
When Bella Vista went into liquidation, Carters brought a claim for $1,078,668.23 against Mr Cancian pursuant to the guarantee in the High Court.
Carters initially filed an application for summary judgment. Mr Cancian opposed on the basis that he was induced to enter into the guarantee by a misrepresentation that the guarantee would be limited to the amount of the credit limit on the account of $50,000. Associate Judge Andrew dismissed the summary judgment application on 22 June 2018 on the basis the issue needed to be tested at trial.( 3)
Following a two-day substantive hearing in the Tauranga High Court, Wylie J issued a judgment on 29 October 2020 ordering Mr Cancian to pay Carters the full amount claimed. ( 4) Mr Cancian appealed this decision.
On 25 June 2021 Carters served Mr Cancian with a bankruptcy notice for the amount of the High Court judgment. Carters was entitled to do so even though the Court of Appeal had not yet issued its decision on Mr Cancian's appeal. Mr Cancian failed to comply with the bankruptcy notice and so committed an act of bankruptcy.
On 16 July 2021 Carters filed the present application for an order adjudicating Mr Cancian bankrupt, with service effected on 10 August 2021.
On 24 August 2021 the Court of Appeal dismissed Mr Cancian's appeal of the High Court judgment.( 5)
On 13 September 2021 Mr Cancian filed a notice of opposition in this proceeding together with an affidavit in support. The grounds of his opposition were set out as follows:
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(a) if Mr Cancian is successful in appealing his criminal convictions, he may have a civil claim which may result in payment of his creditors;
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(b) there is no cost to Carters of further delays;
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(c) if Mr Cancian is adjudicated bankrupt, Carters will receive nothing;
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(d) Mr Cancian presents no risk to Carters or the commercial world.
The hearing of the application for adjudication was delayed until 31 March 2022 as a result of COVID-19 lockdowns and various issues, including the impending decision in Mr Cancian's appeal of his criminal convictions.
On 28 March 2022, just prior to the hearing of this application, Lang J issued his decision in the appeal of the criminal convictions, overturning one of Mr Cancian's criminal convictions but not the remaining two.( 6)
Carters was not aware of Lang J's decision prior to the hearing on 31 March 2022 as a copy of the decision, and various other documents relied on by Mr Cancian, had not been provided to Carters prior to the hearing. This appeared to arise as a result of Mr Cancian being a litigant-in-person rather than being a deliberate attempt to keep documents from Carters.
Following the hearing, I issued a minute dated 1 April 2022 providing an opportunity for Carters to file and serve further submissions addressing:
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(a) Lang J's decision on Mr Cancian's appeal of his criminal convictions under the Building Act 2004;
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(b) the draft report by the Ministry of Business, Innovation and Enterprise (MBIE) in relation to the dangerous and affected building determination by the Tauranga City Council referred to by Mr Cancian during the hearing; and
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(c) the letters filed by four creditors in support of Mr Cancian's application for a halt and victim impact statements by members of Mr Cancian's family.
Carters filed its further submissions on 19 April 2022 and Mr Cancian filed reply submissions on 4 May 2022 as directed.
Section 36 of the Insolvency Act 2006 (“the Act”) provides that the Court may, at its discretion, adjudicate a debtor bankrupt if the debtor has established the requirements set out in s 13 of the Act.
Section 13 sets out the requirements as follows:
13 When creditor may apply for debtor's adjudication A 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 more creditors 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 the period of 3 months before the filing of the application; and
(c) the debt is a certain amount; and
(d) the debt is payable either immediately or at a date in the future that is certain.
There is no question that the debt relied on is for more than $1,000 and that it is currently owing to Carters.
The second requirement is that the judgment debtor has committed an act of bankruptcy. Carters relies on s 17 of the Act, which provides that failure to comply with a bankruptcy notice is an act of bankruptcy.
A bankruptcy notice was served on Mr Cancian on 25 June 2021. No money has been paid or security or agreement reached in response to the bankruptcy notice and so an act of bankruptcy has occurred.
The next requirement is that the debt is for a certain amount. The judgment has been sealed and so there is no question that the debt is for a certain amount.
The final element, “that the debt is payable either immediately or at a date in the future that is certain”, is satisfied as the judgment has been sealed.
With the four elements set out in s 13 of the Act satisfied, there is a prima facie case for adjudication.
Even where all four elements of s 13 are met, s 37 of the Act provides the Court with a discretion to refuse adjudication if:
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(a) the judgment creditor has failed to establish the necessary requirements for adjudication under s 13 of the Act;
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(b) the debtor is able to pay his debts;
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(c) it is just and equitable not to make an order for adjudication;
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(d) if there is any other sufficient reason not to make an order.
The judgment creditor has established the necessary requirements for adjudication under s 13 as discussed above, satisfying (a), and Mr Cancian, by his own admission, is unable to pay his debts, satisfying (b). The factors to consider are therefore (c) and (d).
In Baker v Westpac Banking Corporation, the general discretion under s 37(c) and (d) was described as follows:( 7)
It is proper for the court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest. A creditor who establishes the jurisdictional facts as set out in [the equivalent of s 13 of the Insolvency Act] is not automatically entitled to an order. On the other hand, it is for the opposing debtor to show why an order should not...
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Carters v Cancian
...HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE CIV-2021-470-57 [2022] NZHC 1862 IN THE MATTER of the Insolvency Act 2006 AND IN THE MATTER of the bankruptcy of DANNY JOHN CANCIAN BETWEEN CARTERS a division of CARTER HOLT HARVEY LIMITED Judgment Cr......