Barfoot & Thompson Limited v Dorbu HC Auckland CIV 2009-404-7639

[2010] NZHC 1046

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-007639

IN THE MATTER OF     the Insolvency Act 2006

AND

IN THE MATTER OF     the bankruptcy of John Evans Dorbu

BETWEEN  BARFOOT & THOMPSON LIMITED Judgment Creditor

AND  JOHN EVANS DORBU Judgment Debtor

Hearing:         4 May 2010

Counsel:         T Rea for judgment creditor

J Dorbu in person

Judgment:      4 June 2010 at 2:00pm

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 4 June 2010 at 2:00pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Glaister Ennor, PO Box 63, Auckland 1140 for judgment creditor

J E Dorbu in person at email: [email protected]

BARFOOT & THOMPSON LIMITED V  DORBU HC AK CIV 2009-404-007639  4 June 2010

[1]      Barfoot & Thompson Limited (Barfoot) has applied for an order adjudicating Mr Dorbu bankrupt.  Before addressing that application, the court must deal with an application by Mr Dorbu for stay or adjournment of Barfoot’s application.

[2]      Mr Dorbu’s application has been mirrored by a similar application made to the Court of Appeal.   Although the Court of Appeal last week dismissed that application[1] (and its reasons apply equally to the application in this proceeding) Mr Dorbu is entitled to a decision on the application before this court.

Background

[1] Dorbu v Barfoot & Thompson Ltd [2010] NZCA 216.

[3]      The proceeding has a lengthy history commencing in early 2008 when Mr Dorbu engaged Barfoot as its agent to sell some properties.   This led to proceedings between the parties in the District Court, judgments in favour of Barfoot in those proceedings, and the present bankruptcy proceedings.  This history is set out in the decision of the Court of Appeal.[2]   For the purposes of this judgment it is sufficient to record the following key facts:

[2] At [5] – [14].

a)      Barfoot obtained judgment against Mr Dorbu in a District Court proceeding brought by Mr Dorbu first for $9,868 (on a counterclaim) and secondly for $3,904 (for costs following strike out of Mr Dorbu’s claim).  Mr Dorbu failed to pay the judgment sums;

b)Barfoot served a bankruptcy notice, requiring payment of the two judgment debts, on 17 December 2009 (pursuant to an order for substituted service).  Mr Dorbu did not respond to that notice;

c)        Barfoot filed its application for an adjudication order on 14 January

2010.  It was given a hearing date of 9 March 2010.  It was served on Mr Dorbu on 16 February 2010, together with a summons to debtor (again pursuant to an order for substituted service).

[4]      It is also necessary to recount the history of Mr Dorbu’s application in this court.  Mr Dorbu took no steps to challenge the judgments, or the bankruptcy proceedings, until the hearing of Barfoot’s application on 9 March 2010.  Mr Dorbu appeared at that hearing, without having filed notice of opposition, and sought an adjournment to allow him opportunity to apply to have the District Court judgments set aside.  Mr Dorbu was granted an adjournment to 4 May 2010, notwithstanding opposition from Barfoot, but on conditions which included that he lodge in court the amount sought under the bankruptcy notice, and pay Barfoot costs for its appearance that day, both by 23 March 2010.

[5]      Following that hearing Mr Dorbu filed notice  of opposition to Barfoot’s application, but without seeking or obtaining leave to do so.

[6]      Mr Dorbu filed an application in the District Court to set aside the judgments (another condition of the adjournment) but did not lodge the money in court or pay Barfoot’s costs.  On 24 March 2010, at Barfoot’s request, the hearing of Barfoot’s application was brought forward to 13 April 2010.   A minute was issued to the parties that day, advising them of the new date, and directing that Mr Dorbu’s notice of opposition was not to take effect until he sought and was granted leave to file out of time.

[7]      Mr Dorbu then (on 25 March 2010) applied for leave and for recall of the orders for payment of the debt into court and the costs to Barfoot.  The application was made informally (by memorandum, albeit with a supporting affidavit).  Barfoot did not take issue with the lack of formal application.   On 1 April 2010 I gave a judgment  dismissing  Mr  Dorbu’s  application  for  recall,  extending  time  for compliance with the conditions, reinstating the hearing of 4 May 2010 for Barfoot’s application, and adjourning Mr Dorbu’s application for leave to the same date, to be heard with Barfoot’s application.

[8]      In the meantime, on 29 March 2010, Mr Dorbu appealed to the Court of

Appeal against the orders made on 9 March 2010.

[9]  Prior to the hearing on 4 May 2010, Mr Dorbu filed a memorandum seeking further adjournment on the grounds that his application to set aside the District Court’s  judgment  was  being pursued,  that  he  had  filed  a  further  District  Court proceeding against Barfoot, and that he had applied to the Court of Appeal for stay of these bankruptcy proceedings.   The application for stay was filed on 26 April

2010.

[10]     Barfoot opposed any further adjournment.  Ahead of the hearing on 4 May

2010 its counsel filed a detailed memorandum setting out its grounds, including that the Court of Appeal had declined to hear the application for stay for lack of jurisdiction.  Mr Dorbu filed a further memorandum on the morning of 4 May 2010 advising that further submissions had been put to the Court of Appeal on the issue of jurisdiction, and contending that it remained a ground for adjournment.   He also requested that I recuse myself from this matter.

[11]     I received oral submissions from counsel for Barfoot and from Mr Dorbu at the hearing on 4 May 2010.  However, as that was part of a regular bankruptcy list day, I reserved my decision on both Mr Dorbu’s application for adjournment and Barfoot’s application for adjudication.

[12]     The following day Mr Dorbu advised the Registrar of this court that the Court of Appeal had directed that his application for stay would be heard on 18 May 2010. On receipt of that advice, I issued a minute advising the parties that I would defer my decision until the Court of Appeal had determined Mr Dorbu’s application for stay.

[13]     The Court of Appeal heard Mr Dorbu’s application for stay on 18 May 2010. It dismissed that application on 28 May 2010.

The application for recusal

[14]     I dealt with this application in my minute of 6 May 2010:

[4]       ...  The  second  [ground] was  that  I should  recuse myself  on  the grounds that I harboured “personal hatred or animosity” towards Mr Dorbu either as counsel or personally. The basis for that submission was that I made an order for costs against Mr Dorbu personally in December 2008 in a matter in which he appeared as counsel.  Counsel for the creditor opposed the application on all grounds.

[7]       I see no basis for Mr Dorbu’s application that I recuse myself.  If he wishes to pursue that application he will need to make formal application and support it with appropriate affidavit evidence.  The mere fact that I have made an order against Mr Dorbu in another matter, the reasons for which were given in a judgment, does not constitute a proper basis for recusal on my understanding of relevant authorities.

[15]     Mr Dorbu has not made a formal application.

The application for stay or adjournment

[16]     Mr  Dorbu  made  his  application  for  stay  or  adjournment  of  Barfoot’s application on the following grounds:

a)       The application to set aside the District Court judgments was being pursued (the District Court had set a timetable for filing of affidavits, and a fixture would be allocated after that);

b)He had appealed against the other conditions of adjournment, and applied for stay of this proceeding pending hearing of that application and the substantive appeal;

c)       The outcomes of those proceedings would have a direct effect on

Barfoot’s application;

d)       He was  also pursuing separate proceedings  against Barfoot in the

District Court.

[17]     At the hearing on 4 May 2010, Mr Dorbu submitted that the outcome of the other proceedings was likely to determine the outcome of Barfoot’s application.  He argued that the application should either be stayed, or be adjourned, at least until the Court of Appeal had determined the application for stay pending appeal, but more appropriately until both the appeal and the application for setting aside had been determined.

[18]     It is important to set out the basis for Mr Dorbu’s application to the Court of

Appeal as recorded in its judgment:

[1]      Mr Dorbu applied under Rule 12 of the Court of Appeal (Civil) Rules 2005 for two orders for stay.  They concern:

(a)the execution of an order for costs and security made by Associate Judge Abbott in the High Court as a condition of adjournment of a bankruptcy application; and

(b)      the  further  pursuit  of  the  bankruptcy  proceedings  in  that

Court pending the hearing and determination of:

(i)his appeal to this Court against the costs and security order;

(ii)      an application to the District Court to set aside a default judgment on which the security order and part of the costs order are based.

[2]      The grounds notified in the notice of appeal were:

(a)the pending application to the District Court to set aside the default judgment and the appeal to this Court have merit and are likely to succeed;

(b)the  appeal  would  be  rendered  nugatory  unless  stays  are ordered;

(c)      the effect of the High Court’s order was punitive. [3]        The applicant’s written submissions added:

(d)the Judge lacked jurisdiction to impose as a condition of the adjournment that Mr Dorbu pay into the Court the amount of the claim;

(e)the sanction imposed by the Judge was disproportionate to the circumstances;

(f)Mr Dorbu did not receive a proper hearing and his right to justice under s 27(1) of the New Zealand Bill of Rights Act

1990 was infringed.

[4]      In his oral argument Mr Dorbu sought leave to add:

(g)       the creditor’s application is invalid because it was issued before the time for compliance with the bankruptcy notice had expired;

(h)      the order of the Associate Judge contravened s 42 of the

Insolvency Act 2006.

[19]     Barfoot opposed any stay or further adjournment.  Its counsel submitted that, save for the application for stay, Mr Dorbu had not put forward any additional circumstances to those taken into account on Mr Dorbu’s application to recall the conditions imposed on 9 March 2010.  He submitted that the pending application to set  aside  and  the  new  District  Court  claim  had  been  taken  into  account,  and addressed, by confirming the conditions but extending time for compliance.   He submitted that Mr Dorbu had already been granted two indulgences (the original adjournment on conditions, and the extension of time for compliance), and it was open to the court to take the view that the original adjournment would not have been given at all if the facts as to service (and particularly notice of the hearing date) had been before the court on 9 March 2010.   Counsel also submitted that even if the application to set aside was ultimately successful (which was not accepted), that would only be in respect of the counterclaim as there was no possible basis for challenging the judgment in respect of costs.

[20]     As  to  Mr  Dorbu’s  appeal  and  application  for  stay,  counsel  for  Barfoot submitted that this was a matter of discretion (the court was not obliged to adjourn so as to accommodate an application for stay), and submitted that the court should decline to exercise its discretion having regard to the background of delay (particularly the fact that Mr Dorbu had applied only two days before this hearing and over a month after lodging his appeal).

Discussion

[21]     The decision of the Court of Appeal disposes of all of Mr Dorbu’s grounds. Leaving aside his challenges to my jurisdiction to impose conditions and to the disproportionality  of  the  conditions  (which  the  Court  of  Appeal  rejected),  the grounds  assume  arguable  merit  to  Mr  Dorbu’s  challenge  to  the  District  Court

judgments.  This position underlay his argument that the conditions on adjournment would render his appeal nutagory, and would lead to his adjudication and, hence, inability to pursue either the application to set aside or his substantive proceeding. The Court of Appeal rejected both aspects of Mr Dorbu’s argument:[3]

[3] At [20] – [21].

[20]      If Mr Dorbu lacks means the appeal may be rendered nugatory.  But while a material consideration that does not of itself entitle him to a stay: Cousins v Heslop[4].  The effect on Barfoots of granting a stay is likely to be injurious:  it will have to wait yet longer to collect the debt from a judgment debtor who has already forced the creditor to jump a series of interlocutory hurdles.  This also suggests that the bona fides of Mr Dorbu’s application is questionable.   Further, the stays of execution and of the bankruptcy proceedings are sought in the widest possible terms, and the questions involved are not a matter of novelty, importance or public interest.

[4] Cousins v Heslop [2007] NZCA 377 at [10].

[21]      The stay was  sought  on  the  footing that there  was  merit  in Mr Dorbu’s grounds of challenge to the judgment and costs order made in the District Court.   We see none, nor did Mr Dorbu attempt to persuade us otherwise in oral argument.

[22]     There is nothing before me to warrant any different approach on Mr Dorbu’s application for stay and adjournment in this court.  I would add the following factors:

a)       Mr  Dorbu’s  history  of  inaction  speaks  against  any  merit  in  his application  to  set  aside  or  his  separate  proceeding  in  the  District Court.   His initial response to those judgments was to seek time to pay.    He  did  not  apply to  reinstate  his  claim  or  to  set  aside  the judgment on the counterclaim until faced with the prospect of immediate bankruptcy.

b)He  was  fully aware  of  the  judgments  long before  the  bankruptcy notice was issued, he took no steps to set aside the bankruptcy notice, and he did his best to avoid facing the consequences of his failure to pay the judgments (Barfoot had to seek orders for substituted service both in respect of the bankruptcy notice and the application for adjudication).

c)       Even if he was to succeed in having the District Court set aside the judgment on the counterclaim, I can see no basis for an order setting aside the costs awarded following strike out of his claim.

d)Mr Dorbu has had ample time to meet the conditions for adjournment imposed on 9 March 2010.  His failure to do so is further evidence of his hopeless insolvency (Mr Dorbu has admitted that he is in debt to his bank for a significant amount; although the extent of that indebtedness is not before the court, it is a matter of public record that he is facing bankruptcy proceedings initiated by his bank).

e)       If there is any merit in his claims against Barfoot (which must be doubtful given his failure to prosecute the claims prior to them being struck out) the Official Assignee has the ability to pursue them.  He is in a far better position to take an objective view of the claims.

[23]     Mr Dorbu has already received the benefit of this court’s discretion on three occasions: the initial adjournment, the extension of time for satisfying the conditions, and the extension of time pending the Court of Appeal’s decision.   I can see no reasonable basis to grant him any further indulgence.   His application for stay or adjournment of Barfoot’s application is declined.

The application for leave to file notice of opposition

[24]     I dealt with this in my judgment of 1 April 2010:

[34]     The court has the power to extend time to file for filing notice of opposition: r 1.19 of the High Court Rules.   The court has an unfettered discretion in this, with the overriding consideration being the interests of justice.

[35]     As I have already stated, it would be illogical to grant leave if the orders made on 9 March 2010 are not recalled and have not been complied with.    It  is  implicit  in  the  orders  made  that  if  Mr  Dorbu  had  met  the conditions he would be given opportunity to pursue his application to set aside, and leave to file notice of opposition out of time (albeit that consideration has still to be given to the terms of leave, and particularly the grounds of opposition).

[36]      At this stage I will only say that the likely ground for allowing leave would be to allow Mr Dorbu opportunity to pursue his application to set aside (I am not convinced that his new proceeding adds anything).  Although the parties have put information before me than was available on 9 March

2010, it will still be for the District Court to assess the merits of Mr Dorbu’s application to set aside, both as to his explanation for the delay and the substance of his alleged claim and set-off.  I note, however that Mr Dorbu will have to satisfy both the District Court, and perhaps this Court when considering terms of leave, that he should be given opportunity to re-open his claim after he chose not to pursue it in mid 2009, was subsequently in communication with Barfoot’s solicitors about payment, and failed to apply to set aside until faced with immediate bankruptcy.

[37]     I have come to the view however, having regard to the relatively modest amount of the debt, that Mr Dorbu should have a further opportunity to meet the conditions imposed on 9 March 2010, and in light of that, to pursue his application for leave.

[25]     This has been dealt with by the findings in the Court of Appeal and in the findings above in respect of adjournment of this application.

The application for adjudication

[26]     Barfoot has established the grounds for an order for adjudication.   It has judgments that have not been satisfied or stayed.  Mr Dorbu has committed an act of bankruptcy by failing to comply with a bankruptcy notice, or have that bankruptcy notice set aside.   Barfoot is prima facie entitled to an order for adjudication.  The matters advanced by Mr Dorbu are not sufficient to justify the exercise of the court’s discretion under s 37 of the Insolvency Act 2006 not to make an order for adjudication.

[27]     I make an order adjudicating Mr Dorbu bankrupt.  He is also to pay costs to

Barfoots of and incidental to the application for adjudication, on a 2B basis.  These orders are timed at 2:00pm.

Associate Judge Abbott