Bank of New Zealand v Meban HC Hamilton CIV 2010-419-001550

[2011] NZHC 1469

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2010-419-001550

IN THE MATTER OF     the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of David Bruce Meban

BETWEEN  BANK OF NEW ZEALAND Judgment Creditor

ANDDAVID BRUCE MEBAN Judgment Debtor

Counsel:        Mr Wilkin for the Judgment Creditor Ms Stewart for the Judgment Debtor TJG Allan for the Judgment Creditor DJG Cox for the Judgment Debtor

Judgment:      4 May 2011

ORALJUDGMENT AS TO AWARD OF COSTS OF ASSOCIATE JUDGE CHRISTIANSEN

Solicitors/Counsel:

T Allan, Grove Darlow & Partners, Auckland –  [email protected]

D Cox, Rennie Cox, Auckland – [email protected]

BANK OF NEW ZEALAND V DAVID BRUCE MEBAN HC HAM CIV 2010-419-001550 4 May 2011

[1]      Initially  Mr  Meban’s  application  to  set  aside  a  bankruptcy  notice  was scheduled for a fixture on 12 July 2011.  Subsequently that hearing date was changed to 4 May 2011 to be heard before me in Hamilton.   Through counsel Mr Meban applied   for   an   adjournment   of   that   fixture   due   to   counsel’s   other   fixture commitments.   I directed that application be heard in a telephone conference scheduled for 20 April 2011.  In the outcome of that conference I directed the 4 May

2011 fixture proceed.  I made directions regarding the obligations of parties to file and serve synopses of submissions and other documents.   Mr Meban’s documents were required to be filed and served by 27 April 2011.

[2]      On 29 April 2011 counsel for Mr Meban filed a memorandum.   It records, inter alia:

(a)      Subsequent to Mr Meban’s application to set aside the bankruptcy notice being filed on 20 December 2010 BNZ has purported to sell the three apartments units pursuant to the security it held for the debt owed by Mr Meban’s company and for which Mr Meban provided his personal guarantee.

(b)Settlement of the sale of the three units had not been effected due to caveats lodged by Portside Leases  Limited to  protect unregistered leases of the three apartments in question.

(c)      BNZ has applied to remove those caveats.  Its application is scheduled for a hearing on 3 June 2011.

(d)That the purpose of the previous application for an adjournment was to ensure that the setting aside application be heard after the caveat application was determined in order to crystallise the shortfall owing under the judgment debt admitted by Mr Meban due to BNZ.

[3]      As counsel observed I was not persuaded those reasons provided adequate cause to adjourn the setting aside application.

[4]      Counsel’s  said  memorandum  filed  on  29 April  2011  comments  that  Mr Meban’s case that the pursuit of bankruptcy proceedings in circumstances when BNZ, as  creditor, has not realised its security so as to crystallise the true debt outstanding, will be equally applicable to any application filed by BNZ to adjudicate Mr Meban bankrupt.  In short counsel states there seems little point in attempting to argue the setting aside application before the central issue of whether BNZ has in fact realised its security, as known.   Therefore he says Mr Meban has decided to withdraw his setting aside application on the basis that the same grounds of opposition to an adjudication application will be pursued, should the sale of the three units in question not have been effected by the time that adjudication application is filed.

[5]      Mr Meban withdraws his setting aside application noting, through counsel, that the same arguments raised in respect of it can properly be advanced when the inevitable adjudication application is filed.

[6]      Accordingly I make an order dismissing the setting aside application.

[7]      Mr Maben’s counsel requests that the costs upon the application be reserved until any adjudication application is determined.

[8]      Counsel appearing today for BNZ is on instructions from Mr Allan of Grove Darlow & Partners, Auckland.   For the purposes  of today’s  hearing and  in  the knowledge that Mr Meban’s setting aside application would be withdrawn, Mr Allan has filed a memorandum, for which I thank him.  In short it signals an application for an order for indemnity costs against Mr Meban’s solicitor.  The relevant parts of Mr Allan’s memorandum claim, inter alia:

(a)       The conduct of Mr Meban’s solicitor is a “cynical abuse of the Court’s process to delay the debtor’s insolvency hearing”.

(b)      The whole exercise has cost the creditor significantly.

(c)       On 29 April 2011, two days after submissions were due, the solicitor advised the application would be withdrawn.

(d)The facts relevant to a consideration of an award of indemnity costs against the solicitor include:

(i)       The solicitor has acknowledged Mr Meban was insolvent since

5 August 2010.

(ii)By letter dated 30 November 2010 the solicitor acknowledged that upon realisation of its security for its debt Mr Meban would be liable for a shortfall in excess of $400,000.

(iii)It had not been disclosed in documents supporting Mr Meban’s setting aside application that his solicitor and a Mr Simpson were “both directors and/or shareholders of the companies on whose behalf or in respect of whom caveats were lodged at the time BNZ initiated mortgagee action to sell the properties over which it held security”.

(iv)That  self  interest  “has  clearly  involved  using  the  Court’s process” to effect delays.

(v)That  Mr  Meban’s  solicitor  has  manipulated  the  Court’s processes to obtain not less than a five month delay in the hearing of Mr Meban’s setting aside application.

[9]      Mr Allan’s memorandum then provides suggestions for timetable orders for the filing of memoranda addressing BNZ’s application for indemnity costs.  He seeks an order that those documents required to be filed and served are served at the offices of Mr Meban’s solicitor.

[10]     Mr Allan also requests a half day fixture now be set for the hearing of the adjudication application on the first available date “(irrespective of the availability of

... as preferred counsel on that date) so as to ensure that:

(i)        The debtor does not attempt to delay this application.

(ii)The public policy interest requiring urgency of this kind of application is served and neither the creditor’s interests nor any other creditor’s interests nor innocent third parties’ commercial interests are prejudiced by the debtor continuing to conduct business.”

Considerations

[11]     I have read the two affidavits of Mr Simpson filed in this application on behalf of Mr Meban.   He is the representative of the entities that have lodged the caveats that BNZ has, in separate proceedings, sought to remove.  Those affidavits detail  the  background  of  the  development  in  Gisborne  in  which  Mr  Meban’s company made purchases;  of Mr Meban’s  personal  guarantee of his  company’s purchases; of the leaseback of those units to a company controlled by Mr Simpson; of the background of the circumstances  giving rise, Mr Simpson  asserts, to his entities’ rights  to  claim  a set  off for rental  income expected from  Mr Meban’s company; and, of the perceived legal basis justifying the lodging of caveats by those entities.

[12]     Mr Simpson also describes Mr Meban’s solicitor’s connection to his business entities as being entirely professional.

[13]     Also, this morning I received a copy of the solicitor’s response to Mr Allan’s memorandum.   It contains suggestions about how the Court should proceed if a claim for indemnity costs is to be pursued.

[14]     It   is   my  view   of   the   contrary  indications   provided   by  Mr  Allan’s memorandum, those deposed to by Mr Simpson, and those commented upon by the solicitors’ memoranda,  that  it  is  quite inappropriate to  draw any conclusions  in advance of those matters being considered  on  3 June  2011 upon  BNZ’s  caveat removal  application.    Nor  am  I  prepared  to  defer  a  consideration  of  the  costs question until that time.   This case concerns an application which has now been

withdrawn.  I am not prepared to await the outcome of the setting aside of the caveat application, nor indeed BNZ’s inevitable adjudication application.  The fact is that latter application has not yet been filed and I am not prepared to make any directions about when it should, in the event of it being filed, be heard.  Also it should be noted that per r 24.10 the act of bankruptcy occurs as of today.

[15]     Costs in this case will to be dealt with on the basis of an application filed which has been discontinued and because there is no proper reason to make any assessment about the reasons why it has been discontinued because those reasons are the subject of another Court proceeding to be heard shortly.

[16]     The Bank of New Zealand is entitled to costs and I direct these be fixed on a

2B basis.

Associate Judge Christiansen