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

[2010] NZHC 456

IN THE HIGH COURT OF NEW ZEALAND

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:         by memoranda

Appearances:  T Rea for judgment creditor

J E Dorbu judgment debtor in person

Judgment:      1 April 2010 at 12:00pm

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 1 April 2010 at 12:00pm,

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, by email [email protected]

BARFOOT & THOMPSON LIMITED V  DORBU HC CIV 2009-404-007639  1 April 2010

[1]      The judgment creditor (Barfoot) has  applied  for  an  order  adjudicating  the

debtor (Mr Dorbu) bankrupt.  The matter is before the Court because Mr Dorbu has applied for recall of orders that he pay money into Court, and meet a costs order.  He also seeks leave to file notice of opposition to the judgment creditor’s application for adjudication.

[2]      I have come to the view, for the reasons that follow, that Mr Dorbu has not made out the grounds for recall.  Further, as Mr Dorbu has filed to comply with the terms for adjournment, I see no reason to grant him the further indulgence sought of granting  leave  to  file  notice  of  opposition  and  extending  time  for  doing  so. However, as Mr Dorbu has met one of the conditions (he has filed an application to set aside the judgment on which Barfoot’s application is based) I will defer the next call of Barfoot’s application so as to allow Mr Dorbu further time to meet the other conditions prior to the next call date.

Form of application

[3]      The  application  has  been  made  by  memorandum.       I  will  not  require  the application  to  be  brought  by formal  interlocutory  application,  given  that  Barfoot’s counsel has not taken issue over the form of the application.   As both parties have filed detailed memoranda, I am able to deal with it without the need for a hearing.

History of creditor’s application

[4]      Barfoot   obtained   judgment   against   Mr  Dorbu   in   the   District   Court   at Auckland  on  31  March  2009  for  the  sum  of  $9,868  (comprising  a  claim  for commission of $9,000 plus costs of $868).  That judgment was obtained in default of a defence to a counterclaim in a proceeding brought by Mr Dorbu.

[5]      On 15 June 2009 Mr Dorbu’s claim was struck out for failure to comply with

an “unless” order made on 27 May 2009.  He was ordered to pay costs to Barfoot on that claim amounting to $3,904.

[6]      Mr  Dorbu  did  not  challenge  either  judgment.   Barfoot  eventually  served  a bankruptcy  notice  on  Mr  Dorbu  (pursuant  to  an  order  for  substituted  service)  on 17 December 2009.  Mr Dorbu did not apply to set the notice aside.

[7]      Barfoot issued its application for an adjudication order on 14 January 2010.

It was served on Mr Dorbu (again pursuant to an order for substituted service) by different modes (email, advertisement and delivery to a solicitor) between 16 and 22

February 2010.  The application and summons to debtor contained a hearing date of

9 March 2010.

[8]      Mr Dorbu attended the hearing on 9 March 2010.  He had not filed notice of opposition, but sought an adjournment to allow him an opportunity to apply to set aside   the   underlying   judgment.  Despite   Barfoot’s   opposition   I   granted   an adjournment to the bankruptcy list at 10:45am on 4 May 2010 on three conditions:

a)        Mr Dorbu was to lodge the total of the judgment sums ($13,772) with the Registrar of this Court by 4:30pm on 23 March 2010;

b)Mr Dorbu was to pay Barfoot’s costs for the hearing that day by the same date;

c)        Mr  Dorbu  was  to  file  and  serve  any  application  to  set  aside  the underlying judgments by 4:00pm on 23 March 2010.

[9]      On  12  March  2010  Barfoot’s  solicitors  wrote  to  Mr  Dorbu  confirming  the terms of the three conditions, advising him of the costs claimed ($640 calculated in accordance  with  the  High  Court  Rules)  and  enclosing  a  deposit  slip  for  payment. They warned that if any of the conditions were not met they would contact the Court on 24 March 2010 to have the hearing date brought forward.

[10]     Mr Dorbu did not pay the amount of the judgment sums into Court, nor pay the costs by 23 March 2010 (and still has not done so). He did file an application in the District Court that day asking for the judgments to be set aside or suspended, but

that application was not processed and released to him until the following morning. He served the application on Barfoot’s solicitors that morning.

[11]     Before Barfoot’s solicitors received the application to set aside on 24 March

2010,  they  filed  a  memorandum  stating  that  the  conditions  had  not  been  met  and requested that Barfoot’s application be given an earlier hearing date.   On receipt of that memorandum I issued a minute directing the Registrar to bring the hearing date forward to 13 April 2010.

[12]     In the meantime, Mr Dorbu had also filed a notice of opposition to Barfoot’s application, but without an affidavit in support.   That notice, dated 16 March 2010, was filed on 19 March 2010.   It referred to an application to set aside the judgment having been made.   The notice was not served until 23 March 2010 by which time the  application  had  been  filed.     In  the  minute  of  24  March  2010  I  noted  that Mr Dorbu had not sought or being granted leave to file that notice out of time, and accordingly that it was not to be taken into account.

[13]     On 25 March 2010  Mr Dorbu  filed  his memorandum,  seeking leave  to file notice of opposition out of time and requesting recall of the orders for payment of the judgment debt into court, and for payment of the costs to Barfoot. He also filed an affidavit in support of his opposition, which had been sworn that day.

Application to recall

[14]     I will deal with this aspect of Mr Dorbu’s application first, as I agree with the submission  of  counsel  for  Barfoot  that  it  is  illogical  to  grant  leave  if  the  existing orders are in place but have not been complied with.

[15]     Mr Dorbu seeks recall of the two orders with which he has not complied on two  grounds.   The  first  is  that  compliance  with  the  orders  will  cause  him  and  his family  hardship. The  second  is  that  he  was  misled  by  an  email  from  Barfoot’s solicitor to understand that the hearing was on 16 March 2010.

[16]     The Court’s power to recall is to be found in r 11.9 of the High Court Rules:

11.9     Recalling judgment

A Judge may recall a judgment given orally or in writing at any time before

a formal record of it is drawn up and sealed.

[17]     Judgment  is  defined  in  r  11.1  as  including  a  decree  or  order  of  the  Court. This includes interlocutory orders such as those made on 9 March 2010.

[18]     Although r 11.9 gives the Court an unfettered discretion, it is a serious step to recall a judgment, and one that needs to be taken in a principled way.   The leading statement as to the Court’s approach to an application for recall is that of Wild CJ in Horowhenua Country v Nash (No 2)[1]

Generally  speaking,  a  judgment  once  delivered  must  stand  for  better  or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases

in which a judgment not perfected may be recalled — first, where since the hearing there has been an amendment to a relevant statute or regulation or a

new  judicial  decision  of  relevance  and  high  authority;  secondly,  where

counsel have failed to direct the Court's attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.

[1] Horowhenua Country v Nash (No 2) [1968] NZLR 632 at 633

[19]     The  Court  of  Appeal  has  recently  reviewed  cases  decided  under  the  third category identified by Wild CJ, and concluded that it is to be applied narrowly, and that cases appropriate for recall under this category “are likely to be rare”:   Unison Networks Ltd v CC.[2]

[2] Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [34].

[20]     The  power  to  recall  is  not  a  substitute  for  appeal,  nor  does  not  extend  to recasting  arguments  previously  given  into  a  new  form  or  putting  forward  further arguments that could have been advanced at the earlier hearing but were not:  Faloon v Commissioner of Inland Revenue.[3]

[3] Faloon v Commissioner of Inland Revenue (2006) 22 NZTC 19,832 (HC).

[21]     The first two grounds identified by Wild CJ do not apply in this case.   The issue  for  the  present  case  is  whether  the  circumstances  advanced  by  Mr Dorbu comprise  “some  other  very special  reason”  for  which  justice  requires  recall  of  the orders.

3  

[22]     Mr  Dorbu  has  applied  for  the  orders  to  be  recalled  or  varied.   There  is  no express  power  in  the  Rules  to  vary  the  orders. However,  the  Court  does  have express power to extend time.  If there is need to make a more substantial change, if appropriate the procedure would be to recall the order and replace it with a varied order.

[23]     Turning  to  Mr  Dorbu’s  first  ground,  he  contends  that  payment  of  the judgment sum and costs (a combined total of $14,412) will cause him and his family hardship.   He  says  that  he  has  a  wife  and  three  small  children  who  are  dependent upon him and that he has been unable to practise his profession as a barrister due to a back injury suffered in November 2009.

[24]     I accept from the evidence that Mr Dorbu has suffered a back injury which restricts his ability to sit for lengthy periods, and that the injury will require surgery. However,  Mr  Dorbu  has  not  put  forward  any  evidence  as  to  his  present  financial position  (except  in  respect  of  his  claim  against  Barfoot)  nor  to  show  the  financial effect of his injury, other than a doctor’s certificate that he was unfit for work for the week after he suffered the injury. The information  relevant  to  his  claim  against Barfoot suggests that Mr Dorbu has been active in the local property market but has been affected by the recent financial downturn.  (He contends that in late 2007/early 2008 he was the owner of four properties with a combined market value in the order of  $3.5  million,  financed  by loans  which  appear  to  total  somewhere  between  $2.5 and  $3.0  million,  but  has  since  sold  the  two  properties  with  the  lowest  value  at  a loss.)   I also note that Mr Dorbu was able to present argument to me at the hearing on 9 March 2010 and has been able to prepare and file his application to set aside and his new proceeding in the District Court.

[25]     It was for Mr Dorbu to make out his case for hardship.  He has not done so on the facts before the Court.

[26]     More significantly for the present application, Mr Dorbu was able to attend the hearing on 9 March 2010 but did not raise this matter (and did not do so until Barfoot raised his non-compliance with the orders).

[27]     For his second ground Mr Dorbu says that he had taken no steps by the time

of the hearing because he was misled by an email from the solicitor for Barfoot into believing that the hearing was a week later (on 16 March 2010).

[28]     This is a repetition of his argument at the hearing.  It was taken into account

in the orders made (the grant of an adjournment on conditions).   It does not qualify

as a reason for recall.  In any event it lacks credibility.  First, it is difficult to see how any person could reasonably be misled by the email correspondence, which reads:

Sent:  Monday, 15 February 2010 at 11:03am

Barfoot & Thompson Ltd v Dorbu

Mr Dorbu,

We  are now filing an application  for substituted service of the  bankruptcy proceeding  on  you.   The  orders  sought  include  that  substituted  service  be effected by advertising the proceeding in the NZ Herald.

We  have  become  aware  of  other  bankruptcy  proceedings  that  you  are presently facing with a scheduled hearing date on 20 March, a few days after the first call date of this proceeding on 9 March.   In the circumstances, no purpose will be served by requiring our client to proceed with the formalities of  obtaining substituted  service  orders  on  you  as  it  would  have  the  option either of effecting service if you appear for the proceeding on 20 March, or else substituting in those proceedings as petitioning creditor in the event that claim is settled.

I invite  you  to avoid the need for our  client  to take  the  necessary steps to obtain substituted service by contacting us immediately to arrange a time for you to accept service voluntarily.

Regards Glaister Ennor T Rea

Sent:  Monday, 15 February 2010 11:08

Barfoot & Thompson Ltd v Dorbu

Mr Dorbu,

There was an error in my earlier message regarding the hearing date of the application  in  the  other  proceeding  which  I  understand  is  16  March  at

10.45am,  not  20  March  as  recorded  incorrectly  below.   Nevertheless,  the invitation to accept service voluntarily remains.

Regards Glaister Ennor T Rea

Secondly, Mr Dorbu acknowledges that he received the application for adjudication and summons to debtor, endorsed with the date of hearing of 9 March 2010, the day after  the  email. He says that  he  only attended  the  hearing  “out  of  curiousity”. I regard that statement lacks credibility.  If he had any doubt about the matter, it was a simple matter for Mr Dorbu to have checked the date of hearing with the court.

[29]     Although not stated to be  separate  grounds,  Mr  Dorbu  raised  two  other matters in his memorandum which need to be taken into account. The first was that

he  offers  a  charging  order  over  his  two  remaining  properties. He  has  produced valuations of the properties (both done in late 2007).  One was valued at $1,300,000, the other at $1,100,000.  Mr Dorbu says that the first has debt of 1,080,000 against it, and the second has debt of $945,000.

[30]     Counsel  for  Barfoot  has  rejected  the  offer.      He  says  that  it  is  costly  and procedurally difficult to enforce a charging order.   Further, the valuations are now well out of date and there is no certainty that there is any equity in the properties. Mr Dorbu is currently facing another bankruptcy proceeding, and the charging order may not provide any security in the event of a forced sale.

[31]     I find on the evidence before the court that there is no reason to believe that there is any value to the offer of a charging order.

[32]     The second matter is an allegation that Barfoot does not have “clean hands”. There are two aspects to this.  First, Mr Dorbu contends that Barfoot has caused him substantial losses on the sale of his properties by breaching their listing agreement with him.  This appears to have been the basis of his claim in the District Court that was  struck  out  in June 2009,  the  argument  underlying his  application  to  set  aside, and the new claim that he has brought in the District Court.  This point was advanced at  the  hearing  on  9  March  2010  and  taken  into  account  in  the  orders  made. The second aspect   is   that   he   contends   that   Barfoot’s   solicitors   were   guilty   of misinforming the  court  when  they stated  in  their  memorandum  of  24  March  2010 that  Mr  Dorbu  had  not  made  his  application  to  set  aside  the  judgment.   There  is nothing  in  this  point. The  evidence  shows  that  Barfoot’s  solicitors  had  not  been

served with Mr Dorbu’s application to the District Court at the time of filing their memorandum.

[33]     I find that these reasons, even taken together, do not make this one of the rare cases where justice requires the orders to be recalled.

Application for leave

[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.

Appeal

[38]     Just before release of this judgment the Court received notice of an appeal by

Mr Dorbu against my decision to impose the condition for granting an adjournment

on 9 March 2010.   As far as I am aware, Mr Dorbu has not sought a stay pending appeal.

Outcome

[39]     I make the following orders:

a)        The application for recall is dismissed;

b)The time for compliance with the orders to pay the judgment sum into court and to pay the costs of the last hearing to Barfoot is extended to

30 April 2010;

c)        The application for leave is  adjourned  to  the  bankruptcy  list  at

10.45am  on  4 May  2010,  to  be  heard  with  Barfoot’s  substantive application;

d)        Barfoot’s application for adjudication is to be removed from the list at

10.45am on 13 April 2010 and listed at 10.45am on 4 May 2010.

Associate Judge Abbott