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High Court of New Zealand Decisions |
Last Updated: 28 June 2016
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV-2015-438-38 [2016] NZHC 1225
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UNDER
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the Insolvency Act 2006
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IN THE MATTER OF
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the bankruptcy of Debra Donaldson
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BETWEEN
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BANK OF NEW ZEALAND Judgment Creditor
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AND
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DEBRA DONALDSON Judgment Debtor
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Hearing:
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4 May and 8 June 2016
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Counsel:
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J B Gilbert for the Judgment Creditor
D Donaldson in Person
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Judgment:
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8 June 2016
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ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] On 27 July 2015 the judgment creditor (the Bank) obtained
summary judgment against the judgment
debtor (Ms
Donaldson) and Mr Keith Alastair Donaldson, in the total sum of
$38,291.90. The judgment related to
credit card debts incurred by the judgment
debtors.
[2] The Bank issued a bankruptcy notice against Ms
Donaldson on
6 October 2015. The bankruptcy notice was served on Ms Donaldson
on
3 November 2015. The bankruptcy notice claimed the sum of
$38,341.90 (the judgment sum plus $50 for the costs of a certificate
of the
District Court judgment), together with the further sum of $796 for
costs.
[3] The amount claimed in the bankruptcy notice was not paid within the time allowed for payment, and on 22 December 2015 the Bank filed an application to
have Ms Donaldson adjudicated bankrupt.
BANK OF NEW ZEALAND v DEBRA DONALDSON [2016] NZHC 1225 [8 June 2016]
[4] Ms Donaldson filed a notice of opposition to the application for
adjudication, in which she set out the following grounds:
(a) Estoppel by acquiescence – Unconscionable for the promisor
to renege.
(b) The due process of law has been violated. (c) There is no injured party.
(d) My rights have been violated.
(e) There has been a miscarriage of justice.
(f) Promissory notes are to be honoured and treated as cash.
[5] The parties filed written submissions, and I heard oral argument
from counsel for the Bank and Ms Donaldson on 4 May 2016.
I now give judgment
on the Bank’s application for an adjudication order.
Background
[6] On 12 January 2014, 20 February 2014, 17 March 2014, and 14 April
2014, Mr Alastair Donaldson sent to the Bank four documents
described as
“promissory notes”. The first two were each for $10,000 and the last
two were for $5,000.
[7] The “promissory notes” were in the same general form,
differing only as to date and amount. The first “promissory
Note”,
dated 12 January 2014, was in the following terms:
PROMISSORY NOTE
$10,000.00 NZD
Pay to the Order of: New Zealand Treasury
In the Amount of: Ten Thousand and 00/100 New Zealand Dollars
For Credit to: Bank Of New Zealand for K DONALDSON, BNZ Platinum
Visa no. 4999-1600-0006-6941
Routing Through: Private Prepaid Treasury Account #18237199 c/o Minister of
Finance, Hon. Bill English
This negotiable instrument, tendered lawfully by Alastair Keith Donaldson
(“Maker”) in good faith shall evidence as debt
to the Payee persuant
to the following terms:
This is an unconditional promise to pay.
2. This note is payable on demand.
BNZ VISA Alastair Keith Donaldson
ATT: CFO 14 Alexandra Road
Raetihi
Date of Issue 12-1-2014
[8] While each of these documents were signed by Mr Donaldson, there is
no dispute that the “promissory notes” were
sent purportedly in
satisfaction of the debt Mr and Ms Donaldson owed on their credit card account
with the Bank, for which judgment
was later entered against them in the District
Court.
[9] With the “promissory note” dated 12 January 2014, Mr Donaldson sent a covering letter to the Bank, stating that the note was in payment of the stated amount, and was an acceptable form of payment under the Bills of Exchange Act
1908.
[10] The letter contained the following statement:
However, should you not accept this form of payment, then please return the
Promissory Note, along with a full written explanation
of why your organization
is exempt from the legislation as outlined above, or why the
Commercial Instrument is unacceptable.
Please note –
If you do not return the Promissory Note within 10 (ten) working days,
then we are in agreement that the bill has been paid to the written
amount.
If you do return the Promissory Note within 10 (ten) working days, but without a legitimate written explanation, as to why your organization is exempt from the legislation as outlined above, or why the Commercial
Instrument is unacceptable; then we are in agreement that you have turned
down my legal payment and therefore my account balance is less the amount
written.
[11] On 23 January 2014, the Bank replied to Mr Donaldson, stating that
the promissory note was unenforceable and not an acceptable
form of payment
under the Bills of Exchange Act. The Bank advised “your Promissory Note
is therefore not accepted and is returned with this letter”.
[12] Mr Donaldson replied by sending two letters (to different officers of the Bank), each dated 31 January 2014. He complained that the Bank had not returned the original “promissory note” he had sent, and contended that the effect of his
12 January 2014 letter was that the Bank had therefore agreed that the bill
had been paid to the written amount.
[13] Mr Donaldson made a similar argument in further
letters dated
17 March 2014, and 15 May 2014, as did Ms Donaldson in an email sent to the
bank on 20 March 2014 – because the Bank had failed
to return the original
promissory note within 10 working days, it had accepted the note as
payment.
[14] It is not clear that all of the correspondence has been produced,
but on
31 January 2014 and 11 February 2014 Mr Donaldson sent the Bank two
documents
called “Notice of Failure to Return True and Original Promissory
Note”.
[15] In his letter to the Bank dated 15 May 2015, Mr Donaldson offered
the Bank an opportunity to “cure” any oversight
or mistake on the
Bank’s part by acting within seven days to accept the “promissory
notes”, or explain why the
Bank considered itself exempt from the
provisions of the Bills of Exchange Act 1908. Failure to “cure”
would constitute,
“as an operation of law”, the final admission of
the facts set out in the “Presentments” and “Legal
Notices” sent by Mr Donaldson, through “tacit assent to the
presentment and Legal Notices”.
[16] Mr Donaldson wrote again on 28 May 2014, formally advising the Bank
of
its “default” in failing to honour his “Presentments” and “Failed Notices”.
[17] The Bank responded shortly, on 24 June 2014, referring to letters
from the
Donaldsons dated 12 January 2014, 20 February 2014, 27 March 2014,
and
14 April 2014, and to the promissory notes and other associated documents.
The letter rejected the promissory notes, which were
returned with the letter.
The Bank advised that the debt (then $29,982.94) was still outstanding, and that
legal action would follow
if payment was not made.
[18] Further correspondence was sent by Mr Donaldson in June and July of
2014, purporting to give the Bank “Notices
of Default”,
and/or setting out detailed argument on various provisions of the Bills of
Exchange Act which he said justified
the contention that the Bank had accepted
the notes in payment of its debt.
[19] The Bank commenced a proceeding in the District Court against Mr and
Ms Donaldson in November 2014. Mr Gilbert produced
at the hearing in this Court
certain documents which were filed in that proceeding, without
objection from Ms Donaldson.
One of them was a statement of defence dated 13
January 2015, in which Ms Donaldson and Mr Donaldson expressly pleaded that they
had paid their account with the Bank by the four promissory notes issued between
January 2014 and April 2014.
[20] The Bank subsequently applied for summary judgment on its claims,
and a case management conference was scheduled for 16 February
2015.
[21] In a Minute of the case management conference on 16 February 2016, Judge Ross noted that Ms Donaldson and Mr Donaldson had been served with notice of the conference, but had advised the Registrar by telephone that they would not attend. They had not filed any notice of opposition to the summary judgment application. Judge Ross strongly advised Mr and Ms Donaldson that they should obtain legal advice, noting that the nature of the defence, and some of their other documents, appeared to be “out of touch with reality”. His Honour warned Mr and Ms Donaldson that some documents they had filed might be considered vexatious and an abuse of the Court process.
[22] The summary judgment application was called in the District Court at Taihape on 16 March 2015. The Court file records that Ms Donaldson had telephoned the Court that day to advise that neither she nor Mr Donaldson would be appearing that day. Still no notice of opposition had been filed. The case was adjourned to 13 April 2015 for hearing in the Court at Palmerston North. The application was further adjourned when the case was called on 13 April 2015, first to
10 June 2015 and then (when neither party appeared that day) to 27 July
2015.
[23] Counsel for the Bank filed written submission on the summary
judgment application, in which the issue of the alleged promissory
notes was
addressed. Counsel submitted that the claimed notes were not money, had not been
accepted in substitution for money, and
did not amount to any kind of settlement
agreement.
[24] One set of documents (the interlocutory application for summary judgment, the supporting affidavits, and a memorandum of counsel dated 10 June 2015) were served on 18 June 2015 by delivery to the Donaldsons’ address for service,
14 Alexandra Road, Raetihi.
[25] Judgment was entered for the Bank on 27 July 2015. Neither Mr
Donaldson nor Ms Donaldson appeared at the hearing.
The Court’s jurisdiction to make a bankruptcy order.
[26] Section 13 of the Insolvency Act 2006 (the Act)
provides:
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.
[27] Section 37 of the Act provides:
37 Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt
if—
(a) the applicant creditor has not established the requirements set out in
section 13; or
(b) the debtor is able to pay his or her debts; or
(c) it is just and equitable that the court does not make an order of
adjudication; or
(d) for any other reason an order of adjudication should not be
made.
[28] The elements of s 13 of the Act have been made out in this case: the Bank has obtained a judgment for a certain amount which is excess of $1,000, and that debt is payable immediately. Ms Donaldson committed an act of bankruptcy when she failed to comply with the bankruptcy notice which was served on her on
3 November 2015.
[29] In this case, Ms Donaldson asks the Court to exercise its discretion
to decline to make an order for adjudication under s
37(c) or (d) of the
Act.
[30] The starting point is that the Bank, having established the elements set out in s 13 of the Act, is prima facie entitled to an order for adjudication.1 That does not mean that a creditor who establishes the jurisdictional facts necessary for the making of an adjudication order is not automatically entitled to an order; it is for the debtor to show why an order should not be made. In the end, the Court’s task is to balance the various considerations relevant to the case and determine whether the debtor has
succeeded in showing that an order ought not to be
made.2
1 Re Epirosa, ex parte Diners Club NZ Ltd (HC) Wellington B 498/91, 6 March 1992; B 532/91.
In Re Twidle [1916] NZLR 748 at 749; and Re Fidow [1989] NZHC 298; [1989] 2 NZLR 431 (HC) at 439.
2 Baker v Westpac Banking Corporation CA 212/92, 13 July 1993, at 4.
Ms Donaldson’s submissions
The promissory note argument
[31] Ms Donaldson refers to numerous sections in the Bills of Exchange
Act which are said to support the argument that the debt
was satisfied by the
promissory notes Mr Donaldson sent to the Bank between January and April 2014.
She also refers to ss 78 and
84 of the Stamp & Cheque Duties Act 1971, and
to s 156A of the Reserve Bank Act 1989.
[32] She submits that the notes were made honestly and in good faith, and
that the Bank was prima facie deemed to be the holder
in due course under s
30(2) of the Bills of Exchange Act.
[33] She also relies on s 88 of the Bills of Exchange Act, relating to
presentment of a promissory note for payment. Section
88(1)
provides:
88 Presentment of note for payment
(1) Where a promissory note is in the body of it made payable at a
particular place, it must be presented for payment at that
place in order to
render the maker liable; but in any other case presentment for payment is not
necessary in order to render the
maker liable.
...
[34] Ms Donaldson submits that when the Bank (as holder in due course)
had possession of the promissory notes, made payable to
the payor, it did not
present them to the payor, in accordance with the rules for presentment set out
in s 45. (Section 45(2) provides
that if the drawer of a bill is to be liable on
a bill which is payable on demand, the bill must be presented, by or on behalf
of
the holder and at the proper place, within a reasonable time of the
bill’s issue).
[35] Ms Donaldson then refers to the decision of the UK Court of
Appeal in
Fielding & Platt Ltd v Najjar,3 for
the proposition that a bill of exchange or a
3 Fielding & Platt Ltd v Najjar [1969] 2 All ER 150.
promissory note is to be treated as cash: it is to be honoured unless there
is some good reason to the contrary.
[36] Ms Donaldson invokes the defence of estoppel by acquiescence – she says that the Bank’s silence (by not returning the original promissory notes) has rendered it unconscionable for the Bank to resile from the (Donaldsons’) belief that the debt has been paid. She refers to Tradax Export SA v Dorada Compania SA,4 in support of the proposition that the duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom
the estoppel is raised, acting honestly and responsibly, to bring the true
facts to the attention of the other party known by him
to be under a mistake as
to their respective rights and obligations. Ms Donaldson also refers to the
decision of the High Court
of Australia in Waltons Stores (Interstate) Ltd
v Maher,5 and the New Zealand Court of Appeal decision in
Burberry Mortgage Finance & Savings Ltd v Hindsbank Holdings
Ltd,6 for the general principle that an estoppel may arise in
any circumstances where it would be unconscionable to permit a promisor to
resile from his or her position.
[37] Ms Donaldson further submits that the relevant detriment is that
occasioned
by the promisee’s action on the faith that the representation will be
performed.7
[38] Other authorities referred to by Ms Donaldson in support of her
estoppel submissions include Gillies v Keogh,8 Phillips v
Phillips,9 and Elders Pastoral Ltd v Bank of New
Zealand.10
[39] Ms Donaldson’s next submission is that there has been a due process failure, and that her rights have been violated. She contends that she did not receive proper notice (25 working days) before the summary judgment application was heard on
27 July 2015. She rejects a suggestion by counsel for the Bank that
she made a
4 Tradax Export SA v Dorada Compania SA (1982) Lloyd’s Rep 140 (QBD); at 157.
5 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 HCA.
7 Citing The Commonwealth v Verwayen (1990) 170 CLR 394 (HCA).
8 Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327, 331.33.
9 Phillips v Phillips [1993] 3 NZLR 159, at 167-168.
10 Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180, at 186.
telephone call to the District Court on 11 May 2015, in the course of which
she is alleged to have been told that the hearing of the
summary judgment
application had been further adjourned following the 13 April 2015 hearing.
She says that she received no notice
of any hearing after the hearing of 13
April 2015, and that that was confirmed in a telephone call she made to
a Deputy-Registrar
at the Palmerston North District Court on 5 November
2015.
[40] Ms Donaldson submits that notice of the hearing is an absolute
necessity, and that as she did not receive that notice there
has been a
miscarriage of justice.
[41] In addition to those submissions, Ms Donaldson challenges the
Bank’s claim for the costs of this proceeding, on the
basis that the Bank
should not have commenced the claim against her. She also contends that the
Bank has failed to identify any
party who has been injured by the
Bank’s decision not to accept Mr Donaldson’s promissory notes,
and that
the bank referred to an incorrect account number in one of the
affidavits filed in the District Court.
Discussion and conclusion
[42] The principal issue for this Court is whether the adjudication
proceeding should be stayed or adjourned to allow Ms Donaldson
time to apply to
the District Court to set aside the judgment entered on 27 July 2015. This
Court, sitting in its bankruptcy jurisdiction,
has no jurisdiction to set
aside a judgment of the District Court. While Ms Donaldson has had plenty
of time since July
of last year to make an application to the District Court to
set aside the judgment, or to file an appeal against it, she has not
taken
either of those steps.
[43] I consider first whether the defences that Ms Donaldson proposes to raise may have any apparent merit. If it is clear that they do not, that will be a telling factor against any stay or adjournment of this proceeding to allow Ms Donaldson to apply to the District Court to set aside the judgment.
Promissory notes
[44] Ms Donaldson’s makes the following arguments concerning the
promissory notes:
(a) The Bank was validly paid with the “promissory notes”;
or
(b) the Bank did not heed the conditions appearing on the covering
letters accompanying the “promissory notes”,
and therefore agreed to
accept the “promissory notes” as satisfaction of the debt;
or
(c) The Bank’s conduct has created an estoppel by
acquiescence preventing it from now seeking payment of
the debt.
[45] Looking at the first of those arguments, I note that there have been
a number of cases in New Zealand in recent years where
debtors have tried to pay
debts with documents purporting to be promissory notes or bills of
exchange (not being ordinary
cheques or bank cheques), where the creditor has
not agreed to accept payment in that form. To my knowledge, none of the
debtors’
arguments in those cases have succeeded.
[46] I have considered the various statutory provisions
referred to by Ms Donaldson in her submissions,
but I have come to
the view that it is not necessary to engage in an analysis of whether or
not the documents purporting
to be promissory notes in this case did or did not
conform to the formal requirements of the Bills of Exchange Act 1908. There is
a more simple way to resolve the case, and that is that a creditor is not
required to accept a promissory note or a bill of exchange
as payment of a debt
unless the bill of exchange or cheque is akin to cash, or the parties have
agreed that payment can be made in
that way.
[47] The historical position in New Zealand was that payment of an amount owing could only be made in money, unless the parties had agreed otherwise.11 The authors
of Laws of New Zealand observe:12
11 Plimmer v O’Neill [1937] NZLR 950 (SC).
12 Laws of New Zealand — Money (looseleaf ed, LexisNexis, Wellington) at [34], citing Plimmer v
The general rule is that only the production of money in authorised
“legal tender” can constitute a valid tender, unless
the creditor
waives it or agrees to accept some other method of payment.
[48] But recent decisions of the Supreme Court and Court of Appeal have
made inroads on that rule, variously holding that
electronic transfers
and cheques constitute payment, even absent agreement to that effect.13
The substance of the current position is summarised by the authors of
Law of Contract in New Zealand as follows:14
These cases suggest a mode of construction that the result is more important
than the means: if unconditional payment of funds has
been effected, and the
payee is in just as strong a position as if the specified mode of payment had
been used, then the means of
achieving that result are subsidiary to the result
itself unless the contract very clearly requires otherwise.
[49] Some bills of exchange, such as bank cheques, may be good legal tender, but generally bills of exchange or promissory notes are not regarded as legal tender.15
The only risk with a bank cheque is insolvency of the bank, a risk so remote
that it does not distinguish the bank cheque from legal
tender.16
By contrast, the Supreme Court has held (in the context of a conveyancing
transaction) that a personal cheque could not constitute
payment unless the
parties had agreed to it.17
[50] The purported promissory notes in this case are clearly not akin to
cash or a bank cheque.
[51] Ms Donaldson relies on the dictum of Lord Denning in Fielding
& Platt Ltd v
Najjar that:18
We have repeatedly said in this court that a Bill of Exchange or a Promissory
Note is to be treated as cash. It is to be honoured
unless there is some good
reason to the contrary.
O’Neill [1937] NZLR 950.
14 Burrows, Finn and Todd Law of Contract in New Zealand (5th ed, LexisNexis, Wellington,
2016) at 729.
16 Rick Dees Ltd v Larsen [2006] NZCA 25; [2006] 2 NZLR 765 (CA) at 776.
17 Otago Station Estates Ltd v Parker [2005] NZSC 16; [2005] 2 NZLR 734 (SC).
18 Fielding & Platt Ltd v Najjar [1969] 2 All ER 150 (CA).
[52] But, as counsel for the Bank pointed out, in that case the contract
stipulated that payment was to be made by promissory
notes. The Bank in this
case did not sue on the promissory notes (assuming without deciding that
they qualified as such): it sued on the underlying credit card debt. Moreover I
think there was ample
“reason to the contrary”, entitling the Bank
to refuse to regard the purported promissory notes as equivalent to cash.
Anyone receiving those documents would have entertained the gravest doubts that
they were genuine. Why would Mr Donaldson have
had a private prepaid account
with Treasury, and why should the Bank have been put to the trouble of
presenting the documents
to the Treasury offices in
Wellington?
[53] Ms Donaldson accepted at the hearing that there is no evidence
before the Court that “Private Prepaid Treasury Account
#18237199 c/o
Minister of Finance, Hon. Bill English” exists. She suggested that the
New Zealand government would in this
case pay the Bank, but when I asked her why
the New Zealand government would do that she was unable to offer any clear
answer. For
the same reason that Ms Donaldson could not provide a satisfactory
answer to that question, a creditor receiving documents such as
the
“promissory notes” in this case would not consider that it had
received the equivalent of cash.
[54] Ms Donaldson could not point to any document or oral agreement by
which the Bank actively agreed to accept payment by promissory
note.
Accordingly I find that there was no such agreement.
[55] Ms Donaldson submits, however, that the Bank has acquiesced in the
mode of “payment” proffered by Mr Donaldson.
The basis for this
submission is the covering letters that accompanied the “promissory
notes”, in which Mr Donaldson
stated that if the Bank did not return the
“promissory notes” within 10 (ten) working days, or provide a
legitimate written
explanation as to why it was exempt from the Bills of
Exchange Act and other statutes referenced by Mr Donaldson, then the Bank would
be deemed to have agreed that its debt had been paid to the written
amount.
[56] It is a fundamental principle of contract law that silence, without more, does not constitute acceptance of an offer made by another person. Ms Donaldson cannot
say that the Bank has accepted the promissory notes as payment simply because
Mr Donaldson declared in his letters that non-response
would amount to
acceptance. Any obligation to respond, and the limited timeframe for doing so,
would themselves have been contractual
obligations, which could not have been
imposed on the Bank without its agreement.
[57] In any case, the Bank did respond within Mr Donaldson’s
first 10 working day “deadline”. The Bank’s reply dated 23
January 2014 made
it as clear as a bell that it did not agree to accept payment
by promissory note, at least in the form submitted by Mr Donaldson.
It returned
a copy of the promissory note.
[58] Ms Donaldson submits that return of the original documents
was necessary to avoid acceptance. The same principle is applicable. A
reasonable person would not interpret any of the
Bank’s conduct as
acceptance of Mr Donaldson’s offer, and Mr Donaldson was unable to impose
binding terms on the Bank
unilaterally.
Did the Bank’s conduct nevertheless give rise to an
estoppel?
[59] Ms Donaldson submits in the alternative that the same conduct that
allegedly gave rise to an agreement to accept payment
by the “promissory
notes” gave rise to an estoppel that prevents the Bank from now saying
that it has not been paid.
[60] The Supreme Court in Southbourne Investments Ltd v Greenmount
Manufacturing Ltd succinctly described estoppel in relation to accepting
payment, albeit in the context of a conveyancing
transaction:19
[21] If by the failure to act in a timely way the vendor is found to have
represented that the personal cheque is acceptable, and
the purchaser has
disadvantageously relied upon that representation, then, as this Court stated in
Otago Station Estates, the vendor will be estopped from denying the
validity of the payment effected by the personal cheque. The rationale for the
estoppel
is that it would be manifestly unjust, when the vendor has given the
appearance of accepting the personal cheque, to allow the vendor
to resile from
that stance after it is too late for the purchaser to remedy the
position.
[61] There can be no estoppel in this case for the following
reasons.
19 Southbourne Investments Ltd v Greenmount Manufacturing Ltd [2007] NZSC 62, [2008] 1
NZLR 30.
[62] First, there is nothing amounting to a representation by the Bank
that the “promissory notes” were or would be
accepted. Quite the
opposite—prompt correspondence indicated that the first of them was
rejected. The Donaldsons had no
reason to form any (erroneous) belief that the
Bank would accept their “promissory notes” - any reasonable person
in
their position would have expected the Bank to reject the documents. Nor is
there any evidence that they or either of them acted
to their detriment in
reliance on the belief that the Bank would accept the “promissory
notes” in satisfaction of its
debt. Ms Donaldson has not identified any
way in which she relied upon any such representation.
[63] I accordingly conclude that Ms Donaldson has no arguable defence
based on
the “promissory notes” (or the Bank’s response to
them).
Due process, miscarriage of justice and violation of
rights
[64] These grounds of opposition concern the service of documents
relating to the summary judgment proceedings in the District
Court.
[65] The basis of the submission is that Ms Donaldson says that she had
no knowledge of the hearing on 27 July 2015, and
she was in any
event out of New Zealand in the period from 18 June 2015 to 15 August 2015.
Ms Donaldson produced a travel
itinerary and boarding passes which establish
that she was out of New Zealand in that period.
[66] Ms Donaldson refers to r 12.14 of the District Court Rules 2014,
which applies in circumstances where a party does
not appear at an
application for summary judgment. The rule provides:
12.14 Setting aside judgment
A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been, or may have been, a miscarriage of justice.
[67] The essential issue on any application under the rule would be
whether there has been, or may have been, a miscarriage of
justice in the entry
of judgment on the Bank’s application.
[68] This is not a case like Singapore Airlines Ltd v
Mistry,20 where there was no proper service of the application
for summary judgment, and it was clear that the judgment should be set aside
on
that account alone. In this case, Ms Donaldson acknowledges that she
received the summary judgment application and
the supporting affidavit at
the end of January 2015, and it is clear that she was aware of the hearings on
16 February 2015, 16 March
2015, and 13 April 2015.
[69] For reasons which she has not explained, Ms Donaldson decided not to
attend any of those hearings. Nor was any notice of
opposition filed in
accordance with r 12.9 (although Mr and Ms Donaldson had filed a
statement of defence to the Bank’s
statement of claim).
[70] The Court Minute of the hearing on 16 March 2015 records
that the application was adjourned to 13 April 2015
in the Palmerston North
District Court “for judgment to be entered”. Presumably Ms
Donaldson was aware of this, but
she still did not appear when the case was
called on 13 April 2015.
[71] Further, it appears from Ms Donaldson’s affidavit that she
expected the Court to make a decision on the summary judgment
application on 13
April 2015. She says in her affidavit that she told the Palmerston
North District Court Deputy- Registrar
with whom she spoke on 5 November 2015
that “there was supposed to be a ruling in Palmerston North District
Court on
13 April 2015 for a summary judgment...”
[72] While Ms Donaldson’s apparent inaction in response to the summary judgment application has not been explained, it does appear that she and Mr Donaldson made a deliberate decision not to participate in the various Court
hearings in the District Court.
20 Singapore Airlines Ltd v Mistry [2014] NZHC 1055.
[73] It appears now that she has thought better of that view. In her
submissions, she stated that “[the] unsuccessful defence
in the District
Court are contributed to Debtor relying on legal counsel from a friend, who we
have recently realized that she was
not giving us the correct legal information
that apply to our case and so we have not asked or used her advise for a
while.”
[74] It appears that Ms Donaldson did not advise the Court that she would
be out of New Zealand for a period between June and
August 2015, but in any
event she was not entitled to personal service of the further affidavit which
the Bank filed or of notice
of the new hearing – she and Mr Donaldson had
provided an address for service when they filed their statement of defence, and
the Bank was entitled to leave further documents for Ms Donaldson at that
address in accordance with r 6.1 of the District Court
Rules.
[75] An affidavit sworn on 7 July 2015 establishes that a copy of the Bank’s supplementary affidavit was delivered to Ms Donaldson’s address for service on
18 June 2015. A copy of counsel’s memorandum dated 10 June
2015, which expressly referred to the hearing scheduled
for 27 July 2015, was
served at the same time. Mr Donaldson declined to accept the documents, and
they were left at his feet.
[76] If there was any arguable irregularity over the service which was
effected on
18 June 2015, it would be that (arguably) two sets of documents should have
been delivered, one for Mr Donaldson and one for Ms Donaldson.
But against
that, Mr and Ms Donaldson had not filed separate statements of defence –
they both signed the same document.
[77] Considering all of those factors, I think any irregularity in
service would have been minor. I do not think it reasonably
arguable for
Ms Donaldson that any deficiency in service was sufficient on its own,
without considering the merits of Ms Donaldson’s
case, to amount to a
miscarriage of justice.
[78] I refer in that regard to the decision of Duffy J in Pulman v
Orix New Zealand
Ltd, where the learned Judge considered that whether a judgment which has been
irregularly obtained should be set aside ex debitae justitiae (i.e.
without considering the merits of the dispute) turns on the degree of
irregularity in a particular case.21
[79] When one looks at the merits of the case, it is clear that Ms
Donaldson has no arguable defence to the Bank’s claims.
The defences
based on the “promissory notes” and estoppel are clearly hopeless,
and Ms Donaldson has not advanced anything
else which might have amounted to a
defence to the Bank’s claims. The truth appears to be that Ms Donaldson,
for whatever
reason, simply elected not to participate in the District Court
process. She now wishes to put forward her defences,
and she has done
so forcefully and in considerable detail. But she has not taken any step in
have the District Court judgment set
aside, and that is a further factor which
tells against her on the question of whether a stay or adjournment should be
granted.
[80] I conclude that there is no basis for a stay or adjournment arising
out of the circumstances in which the judgment was entered
in the District
Court.
No injured party
[81] There is no merit in Ms Donaldson’s submission that
no-one has been “injured” in this case.
Mr and Ms Donaldson
incurred debts on their credit card that they have apparently been unable to
pay, and the Bank has been out
of pocket to that extent. It has sued the
Donaldsons and obtained a judgment against them for that “injury”,
and I have
held that the Bank was entitled to reject the “promissory
notes” sent to it by Mr Donaldson. It remains a creditor of
Ms Donaldson
in a sum certain which exceeds $1,000, and as such has standing to bring the
present application for an adjudication
order.
Wrong account number
[82] Ms Donaldson submits that an error was made in one of the affidavits filed by the Bank, in that the wrong account number was stated. There is nothing in this. Any such minor error could not have provided Ms Donaldson with a defence to the
Bank’s claims.
21 Pulman v Orix New Zealand Ltd [2008] NZHC 218; (2008) 18 PRNZ 955 (HC), at [20].
[83] I conclude that there is no merit in any of the arguments that Ms
Donaldson might raise if she were given further time to
apply to the District
Court to set aside its judgment.
[84] Finally, I record that at the commencement of today’s hearing
Ms Donaldson sought to tender further material in support
of a contention that
this Court has no jurisdiction to hear the Bank’s adjudication
application. No such argument was pleaded
in her notice of opposition, nor was
it argued in the submissions she made for and at the hearing on 4 May 2016.
Further, there
is no apparent basis on which any such argument could be
supported. I accordingly declined leave to Ms Donaldson
to make
further submissions.
Conclusion and orders
[85] Ms Donaldson has not advanced any reasons why an
adjudication order should not be made. The Bank’s prima
facie
entitlement to an adjudication order must therefore prevail.
[86] I make the following orders:
(a) An order adjudicating Ms Donaldson bankrupt.
(b) Costs on scale 2B to the Bank, plus disbursements as fixed by the
registrar.
[87] The foregoing orders are timed at
11.50am.
Associate Judge Smith
Solicitors:
Turner Hopkins, Auckland for the judgment creditor
D Donaldson, Raetihi in person
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