BDO Manawatu Limited v Bell
[2013] NZHC 3189
•2 December 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-6845 [2013] NZHC 3189
UNDER the Insolvency Act 2006
IN THE MATTER of the bankruptcy of ROBERT ARTHUR BELL
BETWEEN BDO MANAWATU LIMITED Judgment Creditor
ANDROBERT ARTHUR BELL Judgment Debtor
Hearing: 27 November 2013
Counsel: O J B Lee for Judgment Creditor
Judgment Debtor in Person
Judgment: 2 December 2013
JUDGMENT OF GODDARD J
This judgment was delivered by me on 2 December 2013 at 3.30 pm, pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Duncan Cotterill, Wellington for Judgment Creditor
BDO MANAWATU LIMITED v BELL [2013] NZHC 3189 [2 December 2013]
[1] Before the Court are two applications by Mr Bell, the judgment debtor: an application to set aside a bankruptcy notice dated 4 October 2013, which was served on Mr Bell on 7 October 2013; and an application to set aside a sealed judgment of the District Court dated 16 September 2013. The District Court judgment is in favour of BDO Manawatu Ltd (BDO) in the total sum of $53,849.14 and is in the following terms:
This proceeding was heard on 30 August 2011 and 3 October 2011 at Porirua District Court before the Honourable Judge C N Tuohy, who, having heard from A Darroch, counsel for the Plaintiff and the Defendant in person, and having heard the evidence adduced, and following an appeal being dismissed by the Honourable Justice Williams on 11 July 2012 and the dismissal of two recall applications dated 31 May 2013 and 3 September 2013, the Plaintiff is entitled to:
1. Judgment in the sum of $5,596.70;
2. Interest totalling $1,363.97 to 31 May 2013;
3.Costs in the sum of $38,877.58 in relation to the District Court hearing; and
4. Costs on the appeal in the sum of $8,010.89.
Total - $53,849.14 to 31 May 2013. Date: 16 September 2013
“Asha Prasad”
(Deputy) Registrar
Brief history
[2] On 9 December 2011, BDO obtained the above referred to judgment in the District Court at Porirua in the sum of $10,793.71 in damages plus interest calculated at $11,554.59.
[3] Judge Tuohy concluded the judgment by making the following provision for an award of costs in favour of BDO:
The plaintiff is to make the necessary calculations and present a judgment for approval and sealing which should have attached a schedule of legal costs with sufficient detail to enable the Court to assess whether they are reasonable.
[4] Subsequently, costs in the District Court were fixed on a solicitor-client basis in the sum of $38,877.58. Had costs been awarded on a category 2B basis they would have totalled around $18,000.00. It appears however that costs were sought on a solicitor-client basis because a Calderbank offer made by BDO to settle the matter prior to trial on a without prejudice basis, except as to costs, had not been accepted by Mr Bell.
[5] Mr Bell appealed against Judge Tuohy’s decision in the District Court decision, both as to result and as to quantum and costs awarded. The appeal came before Williams J, who delivered judgment on 11 July 2012. In his judgment Williams J noted at [33] that:1
By way of remedy, Judge Tuohy awarded $10,793.71 in damages (the amounts owing less credits for overcharging), plus $11,554.59 in interest (at
2 per cent per month until the date of judgment), plus $38,877.58 in costs
(reasonable solicitor-client costs).
[6] Williams J upheld the District Court judgment save in respect of a calculation as to interest. In this regard he found at [63]:
As I have concluded, Mr Bell clearly breached the 20 June agreement, and the subsequent oral agreement on the same material terms. Mr Bell’s defences to BDO’s claims had no merit except in relation to interest. The fact BDO conceded on the comparatively minor issue of overcharging cannot change that fact.
[7] In conclusion, Williams J allowed the appeal “in the minor respect described”
but otherwise dismissed it.
[8] Subsequently, Mr Bell applied for a recall of Williams J’s judgment or, alternatively, for leave to appeal to the Court of Appeal. On 31 May recall was granted by Williams J on the basis of new evidence adduced by Mr Bell, namely a new letter of engagement produced by Mr Bell which appeared to be inconsistent with a waiver argument that had been accepted by Williams J in his earlier
judgment.2
1 Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598.
2 Bell v BDO Spicers Manawatu Ltd [2013] NZHC 1287.
[9] In the outcome, fees for some work done were found not to be properly due and owing because it was not work undertaken on Mr Bell’s instruction. A recalculation was made in respect of a proportion of an invoice to allow for overcharged fees on 75 per cent of that invoice and on another invoice, to arrive at a subtotal before interest in the sum of $4,232.70. A calculation of interest on the sum
was then made to arrive at a “total sum owing to BDO of $6,580.98”.3
[10] A further recall of Williams J’s judgment was sought. On 3 September 2013, at the commencement of his judgment on further recall, Williams J recorded by way of background the following:4
[3] The appellant engaged the respondent in June 2008 and, over the next few months, the respondent produced several pieces of work. The appellant paid the first three of the invoices he received from the respondent but refused to pay the remaining two. The respondent claimed against the appellant for the balances owing under these invoices, as well as interest at 2 per cent per month (pursuant to the letter of engagement)5 and reasonable solicitor-client costs (pursuant to cl 11(c) of the appendix to the letter of engagement).6
[4] On 9 December 2011, Judge Tuohy issued a decision finding the appellant liable to pay $10,793.71 in damages (the amounts owing),
$11,554.59 in interest and costs of $38,877.58.
[5] The appellant appealed. On 11 July 2012, I dismissed the appeal for the most part, but I found in favour of the appellant on the issue of interest. The appellant argued that the interest clause in the letter of engagement imposing interest of 2 per cent per month was so excessive as to be unenforceable as a penalty. I agreed that the interest clause was excessive and determined that 15 per cent per annum was a fair substitution.7 That finding is relevant to the appellant’s most recent submission on the rate of interest.
[6] The appellant applied for that judgment to be recalled. On 31 May
2013, I granted this application on the basis that new evidence adduced by the appellant reduced the amount owing under each invoice. I recalculated the judgment sum and ordered the appellant to pay the respondent $6,580. This meant that the respondent had successfully claimed slightly under half of the sum it originally sought.
3 At [39].
4 Bell v BDO Spicers Manawatu Ltd [2013] NZHC 2272.
5 Which states “... we reserve the right to charge interest at 2% per month on all unpaid amounts
(including any interest previously charged).”
6 Which states “You indemnify us, our directors, partners and employees against (a) any loss suffered or liability incurred by us, our partners and employees in connection with any breach of, or default under, this Agreement by you ... [and] (c) any reasonable costs or expenses, including legal costs and expenses (on a solicitor and own client basis), our partners and employees may incur in respect of such loss or liability.”
7 Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598 at [61].
[7] With that result in mind, I ordered the appellant to pay half of the respondent’s legal costs for the appeal judgment, a total of $7,010.69. I invited the parties to file memoranda if they considered that costs should be dealt with on some other basis. I reserved costs on the recall application itself.
[11] The essence of this further application for recall was recorded by Williams J
as follows:
[8] The appellant now applies for further recall on the ground that the court “seems unaware” of the definition of “accounting records” contained in the New Zealand Institute of Chartered Accountants Ethical and Professional Standards (the Standards). The appellant submits that, if I had been aware of that definition, I would not have found any of the work claimed under one of the invoices (invoice #12721) owing.
[12] In relation to costs, Williams J recorded that there was an dispute between the parties as to costs:
[13] Both parties dispute my order as to costs. The appellant submits that he was “generally successful in his appeal” and is therefore entitled to costs. I have already decided that the respondent is entitled to costs so this horse has bolted. The only issue at large was quantum.
[14] The appellant also applies for costs in relation to the recall judgment. As noted above, I reserved costs on this application. I do not consider a costs award is appropriate on the recall application. Though the appellant made some progress as a result of the result, the outcome was effectively that the spoils were evenly shared. Both of those submissions are dismissed.
[13] In relation to the issue of the costs awarded following the District Court hearing, apparently based on the declined Calderbank offer of settlement in a reduced sum, Williams J found as follows:
[17] In my view, the existence of this offer justifies an order for increased costs, but not an award of full costs.8 The appellant successfully reduced the sum he was liable to pay on appeal. That is entitled to some recognition despite the 20 December letter. Overall, I find that an order for increased costs of $1,000 is appropriate to take into account the respondent’s prior offer.
[14] Turning then to consider the issue of the interest to be calculated on the judgment sum, Williams J found as follows:
[18] Both parties dispute the interest calculated for the judgment sum. The respondent correctly submits that interest on the sum owing was
8 High Court Rules, rr 14.10 and 14.11.
incorrectly calculated from 31 October 2008 to 11 July 2012 (the date of the appeal judgment) instead of from 20 October 2008 to 31 May 2013 (the date of the recall judgment). The correct period of interest is 1684 days.
[19] The appellant correctly submits that the adjusted interest rate of 15 per cent is higher than the prescribed rate for that period. The prescribed interest rate for the period 20 October 2008 to 30 June 2011 was 8.4 per cent. The correct sum of interest for that period is $957.541. The prescribed interest rate for the period 1 July 2011 to 31 May 2013 was 5 per cent. The correct sum of interest for that period is $406.455. The total interest owing for the judgment sum is $1363.996.
[15] In the result, the further application for recall was dismissed and Mr Bell was ordered to pay BDO $8,010.89 in costs in relation to the appeal proceeding.
[16] The recalculated judgment sum was set at $5,596.70.
The current applications
[17] In a Minute issued on 11 November 2013, in which he recused himself from hearing Mr Bell’s applications to set aside the bankruptcy notice and the sealed judgment of the District Court dated 16 September 2013, Associate Judge Bell made a number of observations. In relation to the application to set aside the bankruptcy notice, the Associate Judge noted two matters: first, that Mr Bell’s notice of opposition was served out of time, although filed within time; second, that in relation to the merits of the application, there are only narrow grounds on which a bankruptcy notice can be set aside. The Associate Judge further noted that on rare occasions a bankruptcy Court can look behind the judgment underpinning the bankruptcy notice; and the Court may set aside a bankruptcy notice in its inherent jurisdiction. However, where there has been a full hearing in which both sides have appeared, presented evidence and a judgment has been given, the Associate Judge noted it is much more difficult to persuade the Court in its bankruptcy jurisdiction to look behind that judgment.
Discussion
[18] The way in which this litigation has proceeded is problematic and fraught with difficulties. For a start, it is difficult for the Court to now attempt to look behind the sealed judgment of the District Court, given proceedings are so far down
the track and there are already in existence three judgments issued by Williams J. I cannot review the judgments of Williams J as a Judge of the same Court and there is in any event an, as yet, unprosecuted application for leave to appeal from his judgment. If that application is to be pursued, it must be placed before Williams J for determination.
[19] However, on application of the findings that have been made by Williams J, it appears that there is an error on the face of the sealed judgment in the District Court relating to the first two items listed therein and this should be corrected. Both Mr Lee, for BDO, and the Court accepted during the course of the hearing that Mr Bell was correct in his submission that the judgment sum of $5,596.70 includes the interest figure of $1,363.97, when regard is had to the relevant passages of Williams J’s recalled judgments and in particular paragraph [39] of the 31 May 2013 recalled judgment and the last sentence in paragraph [19] of the 3 September 2013 judgment. Consequentially, the total judgment sum of $53,849.14 should be reduced by the sum of $1,363.97 and I will make that amendment accordingly.
[20] In relation to the other challenges put forward by Mr Bell to the remaining items in the sealed judgment, I found no evidence of similar error.
Result
[21] Section 66(1) of the District Courts Act 1947 provides that any final judgment obtained in the District Court may be removed into the High Court upon the application of a judgment creditor.
[22] Section 66(6) provides that:
(6) Notwithstanding anything in this section, any certificate or final judgment signed under the provisions of this section may be set aside or amended by a Judge of the High Court upon such terms as to costs or otherwise as he deems just.
[23] The District Court judgment was certified in the District Court and removed into this Court as an annexure to BDO’s request for issue of a bankruptcy notice against Mr Bell as the judgment debtor.
[24] Pursuant to s 66(6), I now direct the amendment of the certificate of final judgment in accordance with the terms set out in [19] above. Specifically, item 1 is to be amended to read: “Judgment in the sum of $4,232.70”. The total judgment sum is consequentially amended to read: “$52,485.17”.
[25] In consequence, BDO’s bankruptcy notice is also to be amended accordingly and will need to be served again. If Mr Bell wishes to apply to set aside the amended notice, he will have to ensure he files and serves his application within the strict time limits required.
[26] Although Mr Bell can be regarded as having partially succeeded in his application to set aside the bankruptcy notice and the District Court judgment, no costs order will follow as Mr Bell represented himself.
Goddard J
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