Introduction to Bankruptcy Notices

If you are served with a Bankruptcy Notice you should immediately seek legal advice. Failure to either set aside a bankruptcy notice or to comply with the notice within strict time periods is fatal and can have far reaching consequences. The following information is in summary form only and is intended as a general guide. This information is not to be relied upon and is not a substitute for obtaining legal advice. Detailed advice should be obtained to cover a specific fact situation. If you would like our advice then please contact us directly.

1. Defective Bankruptcy Notices – some things to look out for:

A bankruptcy notice must be in Form B2. There are some common issues with bankruptcy notices that may cause them to be defective:

  1. Has the bankruptcy notice been served within 6 months of the date on which it was issued by the High Court? If the bankruptcy notice is renewed then it must be served within 1 month from the expiry of the initial period, or from the expiry of the last period of renewal and not from the date of the order of renewal.
  2. Was the bankruptcy notice personally served in accordance with rules 6.1 and 6.8 of the High Court Rules, or was there an order for substituted service?
  3. Does the bankruptcy notice state the amount of any costs claimed against you;
  4. Does the bankruptcy notice include a full address for payment of the debt. In Re Matheson, ex parte Watson [1972] NZLR 1084 the address for payment specified in the notice was “Auckland”. The Court considered that insufficient and the defect was not cured just because an address for service was contained in the bankruptcy notice.
  5. Does the bankruptcy notice include the full name and address of the judgment creditor or the full name and address for service of the solicitor of the judgment creditor – Re McIntyre[1955] NZLR 7; Re Trueman ex parte Western-Webb and Co [1959] NZLR 737.
  6. Does the bankruptcy notice state all prescribed methods of satisfying the notice. A failure to include any of the contents of paragraph 1 of the notice in Form B2 can make the notice defective. In Re Boddie, ex parte Amburys Ltd [1933] NZLR 1012 the words “or the satisfaction of the Court” were left out. The Court held that the bankruptcy notice was defective and dismissed the petition.
  7. Does the bankruptcy notice purport to be issued in respect to more than one judgment – Re Low [1891] 1 QB 148; Carlyle v McCardle Richardson (HC, Wellington B 394/96, 12 March 1997, Master Thomson)

Despite the above, a Court may still order that a defective Bankruptcy Notice not be set aside pursuant to Section 418 of the Insolvency Act 2006. However this order may not be made if the debtor is prejudiced by the defect.

2. Introduction to Setting Aside a Bankruptcy Notice (if served in NZ)

The following information is in summary form only and is intended as a general guide. This information is not to be relied upon and is not a substitute for obtaining legal advice. Detailed advice should be obtained to cover a specific fact situation. If you would like our advice then please contact us directly.

Do you have a counterclaim, set-off, or cross-demand against the judgment creditor?

If so, you may file an application to set aside the bankruptcy notice in the High Court within 10 working days of being served with the Notice. The application must be supported by an affidavit. Within this strict 10 working day time limit you must also serve a copy of the application and the affidavit on the judgment creditor. Time limits are fatal - there is no provision for the extension of time for making an application outside the time specified on the Bankruptcy Notice.

The High Court may set aside a Bankruptcy Notice if it is satisfied that you have complied with the requirements of the Notice or you satisfy the Court that you a counterclaim, set-off, or cross-demand against the judgment creditor – see Section 17 of the Insolvency Act 2006.

In Clark v UDC Finance Ltd [1985] 2 NZLR 636 Casey J held that the judgment debtor who makes an application to set aside a bankruptcy notice must show:
(a) that (s)he has a general triable counter-claim, set-off or cross demand; and
(b) that it could not have been set up in the action in which the judgment creditor obtained the judgment.

The High Court may also use its inherent jurisdiction to set aside a bankruptcy notice if the Court is satisfied that there is a defect in the process by which the original judgment was made or where there was an arguable defense to that claim.