The Commissioner of Inland Revenue v Mani

JurisdictionNew Zealand
CourtHigh Court
JudgeJudge Faire
Judgment Date29 Sep 2010
Neutral Citation[2010] NZHC 1753
Docket NumberCIV 2010-404-001918

[2010] NZHC 1753

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2010-404-001918

In the Matter of the Insolvency Act 2006

and

In the Matter of the bankruptcy of R Mani

Between
The Commissioner of Inland Revenue
Judgment Creditor
and
Ritesh Mani
Judgment Debtor
Counsel:

SL Law for judgment creditor

Appearance:

R Mani, judgment debtor in person

Application by a judgment debtor for an order setting aside a bankruptcy notice on the grounds that the application for bankruptcy was an abuse of process as the amount claimed by the judgment creditor was disputed and it was just that the court exercise its inherent jurisdiction to set aside the bankruptcy notice — whether the bankruptcy notice should be amended or set aside; whether the Court had an inherent jurisdiction to set aside the bankruptcy notice.

Held: Section 30 Insolvency Act 2006 provided that an overstatement in a bankruptcy notice of the amount owing by the debtor did not invalidate the notice, unless the debtor notified the creditor that the debtor disputed the validity of the notice because it overstated the amount owing, the debtor took steps that would have been compliance with the notice had it stated the correct amount owing (for example, by paying the creditor the correct amount owing plus costs), and took those steps within the time specified in the notice for the debtor to comply. The debtor had not complied with these requirements. There was clear evidence that the amount due, which was the subject of the determination in the District Court and about which there could be no dispute was $129,839.43. The bankruptcy notice should therefore be amended to reflect the undisputed sum due and owing of $129,839.43 and as a condition of such amendment, the judgment debtor should be allowed ten days from the issue of the judgment to make payment, failing which an act of bankruptcy would occur.

The court's inherent jurisdiction was a further way of justifying the amendment to the bankruptcy notice. It did not, however, justify the setting aside of the bankruptcy notice itself. There was evidence of a sum which was clearly undisputed. That part of the judgment had not been met. By allowing the judgment debtor ten working days to pay from the date of this judgment he retained all the rights that he would have had to make payment and thereby avoid an act of bankruptcy had a further bankruptcy notice been served. The application to set aside the bankruptcy notice was refused however the bankruptcy notice was amended to reflect the amount due and payable as $129,839.43.

JUDGMENT OF ASSOCIATE Judge Faire

[on application for order setting aside a bankruptcy notice]

1

The judgment debtor applies for an order setting aside a bankruptcy notice dated 20 May 2010.

2

The application relies on the following principal grounds in support:

  • a) That the judgment debtor is willing to compromise the amount owing on terms that satisfy the court or the judgment creditor;

  • b) That the application for bankruptcy is an abuse of process as the amount claimed by the judgment creditor is disputed; and

  • c) It is just that the court exercise its inherent jurisdiction to set aside the bankruptcy notice.

3

It is appropriate that I record that this application does not involve the most common ground which is advanced by applications to set aside bankruptcy notices. That ground relies on the Insolvency Act 2006, ss 17(1)(d)(ii) and 7. It is concerned with the alleged existence of a cross-claim.

4

The judgment creditor obtained judgment against the judgment debtor in the District Court at Auckland on 30 September 2008. A certificate for evidential purposes was issued by the district court recording the total sum for which judgment was entered and including the cost of the certificate as $229,611.39. The certificate is dated 5 November 2008.

5

The amount of the claim as recorded in that document is $229,401.39. The balance is made up of costs and disbursements.

6

On 29 March 2010 the judgment creditor filed a request to issue a bankruptcy notice in the High Court. The bankruptcy notice was issued and served. This current application follows that service. It is accepted by the Commissioner of Inland Revenue that the application was filed within the time specified in the Insolvency Act 2006, s 17 and in the notice. The result is that by the operation of hcr 24.10 the time for compliance with the bankruptcy notice is extended until this application is determined.

7

The Commissioner of Inland Revenue opposes the setting aside of the bankruptcy notice and advances four principal grounds in support of his opposition. They are:

  • a) The Commissioner of Inland Revenue has issued assessments to the judgment debtor/applicant stating how much is owing for the relevant tax periods;

  • b) The Commissioner of Inland Revenue has obtained judgment by default in the District Court for the amount owing. The judgment debtor has not paid the amount owing as detailed in the bankruptcy notice;

  • c) The judgment debtor has not initiated the statutorily defined disputes procedure within the statutorily defined time limits and consequently the assessments are deemed to be correct; and

  • d) Neither the District Court nor the High Court (other than within its judicial review jurisdiction) has the jurisdiction to determine the validity or otherwise of the assessments.

8

The judgment debtor was formerly represented by counsel. When this fixture was allocated directions were made for the filing and service of submissions. The judgment debtor did not comply. An urgent conference was called before Justice Lang to deal with that non-compliance. His Honour minuted the file as follows:

1
    The proceeding will proceed as scheduled on 29 September 2010, whether or not the debtor has filed any submissions. 2. The debtor is to file and serve his written submissions no later than Wednesday, 22 September 2010.
9

The judgment debtor has not filed any written submissions.

10

The judgment debtor appeared when this matter was called. He further advised me that he had not received the most recent affidavit filed on the Commissioner's behalf. That affidavit was filed so that the court...

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