Re Taylor

Re Taylor
Re Taylor
Court	Auckland High Court
Full case name	In Re Taylor
Decided	1 September 1992
Citation(s)	(1992) 4 NZBLC 102,875
Court membership
Judge(s) sitting	Thomas J
Keywords
	Insolvency, Rogernomics

Last updated May 04, 2019

Re Taylor is a leading New Zealand case on when the High Court will exercise its discretion and refuse to adjudicate a debtor bankrupt.

New Zealand is a sovereign island country in the southwestern Pacific Ocean. The country geographically comprises two main landmasses—the North Island, and the South Island —and around 600 smaller islands. New Zealand is situated some 2,000 kilometres (1,200 mi) east of Australia across the Tasman Sea and roughly 1,000 kilometres (600 mi) south of the Pacific island areas of New Caledonia, Fiji, and Tonga. Because of its remoteness, it was one of the last lands to be settled by humans. During its long period of isolation, New Zealand developed a distinct biodiversity of animal, fungal, and plant life. The country's varied topography and its sharp mountain peaks, such as the Southern Alps, owe much to the tectonic uplift of land and volcanic eruptions. New Zealand's capital city is Wellington, while its most populous city is Auckland.

The High Court of New Zealand is the superior court of New Zealand. It has general jurisdiction and responsibility, under the Senior Courts Act 2016, as well as the High Court Rules 2016, for the administration of justice throughout New Zealand. There are 18 High Court locations throughout New Zealand, plus one stand-alone registry.

Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

Background

The background to the application to adjudicate Mr Taylor bankrupt was summarised by Justice Thomas,

The Rt Hon. Sir Edmund "Ted" Walter Thomas is a well known New Zealand jurist. He is a retired judge of the Court of Appeal of New Zealand and a former acting judge of the Supreme Court of New Zealand.

Mr Taylor's creditors, Mr and Mrs Greenwood, obtained a summary judgment against Mr Taylor on 17 April 1991 for $21,448.86. The summary judgment application had not been opposed. The judgment sum represented unpaid rent and outgoings for which Mr Taylor and his wife were liable under a lease which they had taken from Mr and Mrs Greenwood. The lease related to business premises occupied by Mr and Mrs Taylor's company. Sensitive readers liable to be easily disturbed should look the other way when I recite that the company went by the awful name of "Bath and Dunny Shop Limited". As befits its name it went down the drain, and it is now in liquidation.

Following judgment, Mr and Mrs Greenwood were unable to obtain repayment of any part of their judgment debt. They sought execution against Mr and Mrs Taylor's assets, including their real property, but the assets and property proved worthless, and there was no equity available for them or any other unsecured creditors. Consequently, on 16 March last, Mr and Mrs Greenwood issued a bankruptcy notice against Mr Taylor. It was renewed on 16 April 1992 and was finally served on Mr Taylor on 16 May.^[1]

Judgment

The debtor, Mr Taylor, made an application in opposition to a bankruptcy notice. Although Taylor had no technical grounds on which to oppose the notice, Justice Thomas held,

The term legal technicality is a casual or colloquial phrase referring to a technical aspect of law. The phrase is not a term of art in the law; it has no exact meaning, nor does it have a legal definition. It implies that strict adherence to the letter of the law has prevented the spirit of the law from being enforced. However, as a vague term, the definition of a technicality varies from person to person, and it is often simply used to denote any portion of the law that interferes with the outcome desired by the user of the term.

For my part, I consider that adjudicating a person bankrupt when that person is essentially a victim of the current downturn in this country’s economy may, in certain circumstances, be unnecessarily severe. In Mr Taylor’s case I believe that the collapse of his business can be directly traced to the political and economic developments which took place at the time. But for those developments, Mr and Mrs Taylor would probably have a thriving business today. Bankruptcy will not now realise one cent in the dollar for Mr and Mrs Greenwood. Moreover it is difficult to perceive any public interest element which would be served by making Mr Taylor bankrupt. He cannot get a job and it is unlikely that he will get credit. To make Mr Taylor bankrupt would be purely punitive and serve no practical or useful purpose. To my mind, sufficient cause exists for no order of adjudication to be made.

The only question, therefore, is whether the issue of bankruptcy should be left to be finally decided at the hearing of the petition, should Mr and Mrs Greenwood decide to pursue that course, or whether I should stay the proceeding now. There is much merit in Mr Sadler’s observation that this proceeding should be brought to an end one way or another today. I therefore propose to grant a stay. In the event that Mr and Mrs Greenwood obtain evidence that Mr and Mrs Taylor’s fortunes have changed for the better it would be open to them to apply to the Court to uplift this stay. The debt as Mr and Mrs Taylor will appreciate, remains due and owing.^[2]

Significance

The rule in Re Taylor is codified in the Insolvency Act 2006 which states that a court may at its discretion refuse to adjudicate a debtor bankrupt if "it is just and equitable that the court does not make an order of adjudication".^[3]

A debtor is an entity that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this debt arrangement is a bank, the debtor is more often referred to as a borrower.

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References

↑ Re Taylor (1992) 4 NZBLC 102,875.
↑ Re Taylor (1992) 4 NZBLC 102,875 at 879.
↑ Insolvency Act, s 37(c).

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[1] Re Taylor (1992) 4 NZBLC 102,875.

[2] Re Taylor (1992) 4 NZBLC 102,875 at 879.

[3] Insolvency Act, s 37(c).