IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE	
CIV-2015-485-973
[2018] NZHC 3022	

BETWEEN	GARTH BOWKETT PATERSON
Applicant	
AND	LEPIONKA & COMPANY INVESTMENTS LIMITED
First Respondent

THE OFFICIAL ASSIGNEE
Second Respondent	

Hearing:	7 November 2018	
Appearances:	Applicant in person
M G Colson for first respondent P Chisnall for second respondent	

Judgment:	
21 November 2018	

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]	On 5 April 2016, this Court made an order bankrupting the applicant, Garth Paterson, and appointed the Official Assignee at Wellington as the assignee of his estate in bankruptcy. That order was made on the application of the first respondent, Lepionka & Company Investments Ltd, the judgment creditor.

[2]	By originating application dated 19 April 2016, Mr Paterson applied for an order pursuant to s 309(1)(a) of the Insolvency Act 2006 for the annulment of his bankruptcy in the following terms:

The Applicant, Garth Bowkett Paterson, will on [28 April 2016] apply to the Court for Orders:

PATERSON v LEPIONKA & COMPANY INVESTMENTS LIMITED [2018] NZHC 3022 [21 November 2018]

(a)	pursuant to section 309(1)(a) of the Insolvency Act 2006 annulling the bankruptcy adjudication of Garth Bowkett Paterson entered in the High Court at Wellington on 5 April 2016.

(b)	Setting aside the summary judgment obtained by the Defendant Company against Garth Bowkett Paterson dated the 5th day of April 2016.

(c)	Alternatively staying any enforcement action reliant upon the summary judgment obtained by the Defendant Company against Garth Bowkett Paterson on the 5th day of April 2016.

(d)	Awarding costs to the Applicant.

[3]	That originating application was heard by Associate Judge Osborne on 16 June 2016. In a fully reasoned judgment of the same date, the Judge dismissed the application.1

[4]	The originating application now before the Court is dated 12 July 2018. Insofar as the description of the application is concerned, it is in almost the same terms as the earlier application:

1.	The Applicant, Garth Bowkett Paterson will on [28 August 2018], apply to the Court for Orders:

(a)	Pursuant to s 309(1)(a) of the Insolvency Act 2006 annulling the bankruptcy adjudication of Garth Bowkett Paterson entered in the High Court at Wellington on 5 April 2016.

(b)	Setting aside the summary judgment obtained by the Defendant against Garth Bowkett Paterson dated the 5th day of April 2016.

(c)	Alternatively staying the applicant’s bankruptcy, and any enforcement action obtained by the defendant stemming from the judgments obtained by the defendant on the 5th day of April 2015.

(d)	Awarding costs to the Applicant.

[5]	The grounds for the orders sought set out in the two originating applicants are lengthy. They are not in the precisely the same terms. But they cover much the same ground.

1	Paterson v Lepionka & Company Investments Ltd [2016] NZHC 1331.

[6]	Upon Mr Paterson’s adjudication on 5 April 2016, his estate was vested in the Official Assignee. He has no standing to challenge the summary judgment obtained by Lepionka on the same day as he was adjudicated bankrupt. Accordingly, those aspects of his application that relate to the summary judgment may be dismissed on that basis alone without further discussion.

[7]	That brings me to the application pursuant to s 309(1)(a) of the Insolvency Act and the alternative application for a stay, to the extent that it relates to the order of bankruptcy.

[8]	Section 309(1)(a) says:

(1)	The court may, on the application of the Assignee or any person interested, annul the adjudication if—

(a)	the court considers that the bankrupt should not have been adjudicated bankrupt; or

…

[9]	The cases are clear that the class identified as “any person interested” includes the bankrupt so that he or she is entitled to make an application pursuant to this provision.2

[10]	Whilst the cases are also clear that an applicant may make more than one application pursuant to s 309, in Creser v Creser Associate Judge Smith concluded that a bankrupt was not entitled to make a second application pursuant to s 309(1)(a)
– that is to say, on the basis that the order for adjudication ought not have been made in the first place.3

[11]	In Creser, Associate Judge Smith was dealing with applications made pursuant to s 119(1)(a) of the Insolvency Act 1967. That Act of course has since been repealed and replaced. But s 309(1)(a) of the current legislation is in materially identical terms.

2	Auckland City Council v Glucina [1997] 2 NZLR 1 (CA).
3	Creser v Creser [2014] NZHC 3267.

[12]	Associate Judge Smith identified the issue as it arose in Creser by asking “… is Mr Creser entitled to make another application under s 119(1)(a) when a previous application under that section has been heard and dismissed?”.

[13]	Here is how Associate Judge Smith answered that question:

[41]	The question here is whether Mr Creser is entitled to make more than one application for annulment under s 119(1)(a).

[42]	I think the answer must be “no”. The point arose in Cameron v Official Assignee, a case to which Mr Haines referred in his submissions.4 In that case, the debtor had been adjudicated bankrupt in July 1980, and later that year applied for an order of annulment. The debtor’s application was made under s 119(1)(a) of the 1967 Act. The application for annulment was dismissed, but leave was reserved to the debtor to apply again if grounds arose under s 119(1)(b). The case came before Doogue J in March 1989, when the debtor made a second application for annulment of the adjudication order made in July 1980. Counsel for the former bankrupt (by then, the debtor had been discharged from bankruptcy) submitted that the original order for adjudication ought not have been made; that the case came within s 119(1)(a) of the 1967 Act. Counsel for the Official Assignee pointed to the fact that, when the case came before Bisson J on 17 October 1980, the Judge refused to make an annulment order under s 119(1)(a), but reserved the debtor’s position under s 119(1)(b).

[43]	Doogue J dealt with the court’s dismissal of the earlier application under s 119(1)(a) in the following terms:

I am also faced with the position where Bisson J took the view, on 17 October 1980, that the identical application which is now made to me should be refused but that leave should be reserved to the Applicant to apply again but solely if grounds arise under section 119(1)(b) if [a Court proceeding relating to the debtor’s tax liability] was decided in his favour. Whilst the point has not been argued before me, it appears to me that there was necessarily a determination by Bisson J that relief should not be granted under s 119(1)(a) of [the 1967 Act] and that, there having been no appeal from that application, the applicant’s present rights relate only to the extent that they were kept alive by Bisson J in respect of s 119(1)(b) of [the 1967 Act].

[44]	So in this case, there has been no successful appeal against the August 2007 judgment of MacKenzie J, in which an annulment application made by Mr Creser under s 119(1)(a) was dismissed.

[45]	It seems to me that there are two broad points of principle which favour the view that a bankrupt (or former bankrupt) should not be permitted to make serial applications for annulment of the original adjudication order. First, there is the principle of finality. It is appropriate in bankruptcy law that issues should be concluded once and for all, in the interests of commercial

4	Cameron v Official Assignee HC Hamilton B81/80, 21 March 1989.

certainty and finality.5 Secondly, there is the broader litigation principle that a party should put before the Court all matters of which he or she is aware, which go to the issue to be determined, at the one hearing. In Greenhalgh v Mallard Somervell LJ said:6

I think that on the authorities to which I will refer it would be accurate to say that res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but that it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.

[46]	More recently, the same point was made by Asher J in Rafiq v Secretary, Department of Internal Affairs of New Zealand:7

Mr Rafiq returns to Court to advance arguments that he could have put forward for decision in the 1385 proceedings, but failed to raise. A party cannot bring a case relating to a certain party, certain sequences of conduct and a certain timeframe, and then when it fails bring another case raising another similar complaint to the same party, the same sequence and the same timeframe. Parties must bring their whole case to the Court so there can be finality of litigation.

[47]	In this case, the factual bases for Mr Creser’s application were all well known to him before he made the annulment under s 119(1)(a) which was dismissed by MacKenzie J in August 2007. The broad issue determined by MacKenzie J on Mr Creser’s 2007 annulment application, was whether or not the March 2004 adjudication order should have been made, and the Judge determined the issue against Mr Creser.

[48]	Mr Haines submits that Mr Creser did not have the benefit of counsel’s assistance in the earlier hearings, but I am not aware of any exception to the principles of finality and a litigation’s obligation to put all relevant and available arguments before the Court on the one application on that account. I do not think it is open to Mr Creser to bring a second application, relying on grounds all of which were available to him before the first application was made. The question of whether the March 2004 adjudication order should not have been made has been determined against Mr Creser, and (as in Cameron v Official Assignee) the point cannot be re-litigated now.

[14]	For the generality of cases, that reasoning – reflecting as it does a straight-forward application of res judicata or issue estoppel principles – appears to me to be unanswerable.

5	Insolvency Law and Practice (online ed, Brookers) at [IN37.01(1)(a)], citing Re Guest, ex parte BNZ Finance Ltd [1991] 1 NZLR 250 (HC) at 255.
6	Greenhalgh v Mallard [1947] 2 All ER 255 (CA) at 257.
7	Rafiq v Secretary, Department of Internal Affairs of New Zealand [2014] NZHC 2064 at [21].

[15]	One of the arguments advanced by Mr Paterson before me was based on an allegation of fraud against Lepionka and its advisers. Essentially, his contention was that he had paid the $8,931.36 judgment debt upon which Lepionka’s application was based by the time its application came on for hearing, that Lepionka and its advisers knew this and that they conspired to hide this from the Court in order to secure an order bankrupting him.

[16]	Notwithstanding the Creser case I accept that there may be room for a bankrupt to make a second application pursuant to s 309(1)(a) if new evidence comes to light subsequent to a first such application indicating that the order bankrupting him or her was obtained by fraud.

[17]	But, here, there is no new evidence. Precisely the same argument was available to Mr Paterson, advanced on his behalf by counsel before Associate Judge Osborne on 16 June 2016, and rejected by the Judge.

[18]	Like Associate Judge Smith in Creser, I have considered whether, if I am wrong in concluding that Mr Paterson may not make a second application for an annulment pursuant to s 309(1)(a), I would exercise the Court’s discretion in his favour. I would not be prepared to do so for three principal reasons:

(a)	First, Mr Paterson has delayed making this application. As already said, the order for his adjudication in bankruptcy was made in April 2016. His first application pursuant to s 309(1)(a) was determined in June 2016. This application was filed and served over two years later.

(b)	Second, Mr Paterson is in any event a bankrupt in Australia.

(c)	Third, this application is opposed not only by Lepionka but also by the Official Assignee. The Official Assignee’s report filed for the purposes of this application, and forming part of the evidence before me, indicates that Mr Paterson has assets of appropriately $9,000 and potential liabilities of over $7,700,000.

[19]	Mr Paterson’s application is dismissed.

[20]	I reserve costs. If the respondents regard it as a worthwhile exercise to seek costs, and if Mr Paterson and counsel are unable to agree on costs, they may file memoranda and I will deal with them on the papers. If it assists, I can indicate that my preliminary view, without having the benefit of argument, is that both the first and second respondents are entitled to their costs on a 2B basis and that I can see no obvious grounds for increased or decreased costs.

Associate Judge Johnston

Solicitors:
Bell Gully, Wellington for first respondent