Bell v BDO Spicers Manawatu Limited

[2014] NZHC 1078

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-6845 [2014] NZHC 1078

IN THE MATTER OF	The Insolvency Act 2006
BETWEEN	ROBERT ARTHUR BELL Applicant
AND	BDO SPICERS MANAWATU LIMITED Respondent

Hearing:	19 May 2014
Counsel:	A B Darroch for Respondent Applicant in person
Judgment:	19 May 2014

ORAL JUDGMENT OF MACKENZIE J

[1]      This is an application for stay of a judgment and to set aside a bankruptcy notice.

[2]      The matter has a history which is already quite extensive.   The judgment creditor, BDO Spicers Manawatu Limited (BDO), was engaged by the judgment debtor (Mr Bell) to provide professional services to him, particularly in relation to some matrimonial proceedings.  Mr Bell disputed the fees and the right of BDO to recover fees and the matter was heard in the District Court at Porirua.  In a reserved judgment   delivered   on   9 December 2011,   Judge Tuohy   gave   judgment   for

$10,793.71 plus interest at two per cent per month until the date of judgment, plus actual and reasonable legal costs.   The award of actual and reasonable legal costs was based on a provision in BDO’s letter of engagement to the effect that BDO was

entitled to indemnity costs.1

1      BDO Spicers Manawatu Ltd v Bell DC Porirua CIV-2009-091-365, 9 December 2011 at [35].

[3]      Judgment  was  sealed  in  the  sum  of  $10,793.71  for  the  fees  claim,  plus interest in accordance with two per cent per month.  The sum claimed, and for which judgment was entered, in relation to costs was $38,877.58.  Mr Darroch had filed a memorandum advising that the costs claimed were invoices for E C Credit Control totalling $1,231.25 and from Duncan Cotterill totalling $37,646.33.

[4]      Mr Bell appealed to this Court against that judgment.  The appeal was heard by Williams J  who  delivered  a  judgment  dated  11 July 2012.    In  that  judgment Williams J reduced the interest payable from two per cent per month to 15 per cent per annum.   He directed that the figure was to be recalculated.   As to the costs

awarded in the District Court Williams J said:2

[62]      BDO’s right to reasonable solicitor-client costs stems from clause

11(a) and (c) in the appendix to the letter of engagement of 20 June.  Mr Bell submits that this clause cannot apply because the triggering requirement of a

“breach of or default under” the agreement (set out in para (a)) was not met.

This was because Mr Bell had valid grounds for disputing his invoice – so

there was really no “breach” or “dispute” at all.

[63]      This argument must also fail.  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.

[5]      So the outcome was that, except for the adjustment in respect of interest, the appeal was dismissed.

[6]      Mr Bell applied for a recall of, and leave to appeal against, that judgment. Williams J delivered a judgment dated 31 May 2013.3   In it he considered Mr Bell’s submissions (and apparently some new evidence).  He found that there should be an adjustment because some of the work done was not work undertaken on Mr Bell’s instructions as required by the terms of engagement.  He allowed the application for recall  to  the  extent  that  he  reduced  the  fee  component  of  the  judgment  from

$10,793.71 to $4,232.70.  To that he added interest to give a total of $6,580.98 and

said:4

2      Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598.

3      The judgment suggests that this was dealt with on the papers. Mr Darroch advises that there was an oral hearing.

[40]      Mr Bell must pay $6580.98 to the respondents.

[7]      Williams J did not in his recall judgment expressly address the issue of the costs of $38,877.58 which had been awarded in the District Court.   He did not discuss whether that might have been affected by the view which he had taken that some of the work was not undertaken in terms of the terms of engagement.  He said of costs:

[41]     As  for  costs,  the  letter  of  engagement  only  entitles  BDO  to “reasonable solicitor-client costs” in relation to remedying breach of the agreement.  The original debt claimed by BDO was $13,653.01.  So BDO has succeeded in its claim in respect of a little under half that sum.  It seems fair to allow half of the respondent’s claimed $14,021.38 costs accordingly. Mr Bell would therefore pay half of the respondent’s legal costs which amount, on my calculation, to $7010.69.  If counsel consider that costs under the letter of engagement should be dealt with on some other basis than my proposal here, they may file memoranda within 21 days hereof.

[42]     I apprehend that there may be no need to address Mr Chisnall’s application for leave to appeal, but if I am wrong in that, the basis for appeal may well now change.  Mr Chisnall should file a memorandum clarifying the point before I decide what should be done with that application.

[43]      Costs on this application are reserved.

[8]      Mr Bell has interpreted the combined effect of [40] and [41] as being that the award of costs in [41] was to replace the award of costs in the District Court of

$38,877.58.  Mr Darroch submits that the award in [41] is of costs in the High Court, and is additional to the District Court award, which has not been disturbed on appeal.

[9]      Mr Bell made a further application for recall and for costs pursuant to the reservation of costs in [41] of the judgment of 31 May.  In that application, Mr Bell raised issues challenging the correctness of some of the reasoning of Williams J in the recall judgment of 31 May.  Williams J addressed those and issued a judgment

dated 3 September 2013 dismissing the recall application.5    On the issue of costs,

Williams J noted that he had decided that BDO was entitled to costs.  He described quantum as being at large, in that he had addressed quantum to some extent in [45] of  his  judgment  of  31 May,  but  had  invited  further  memoranda.    BDO  sought increased costs over those which were indicated in [41] of the 31 May judgment. The respondent relied upon a Calderbank offer which had been made before the

District Court hearing and rejected.  Williams J ordered increased costs of $1,000 to take into account that prior offer, leading to a costs award of $8,001.89 in place of the $7,010.89 referred to in [41] of the judgment of 31 May.   He noted that the recalculated judgment sum was $5,596.70.

[10]     That recalculated judgment sum of $5,596.70 covered the fees plus interest, but  did  not  include  the  $38,877.58  for  costs  awarded  in  the  District  Court. Williams J did not in his 3 September judgment address the issue of costs on the original recall application, which he had reserved in his 31 May judgment.

[11]     A bankruptcy note was issued by BDO to enforce the judgment and Mr Bell made application to have that notice set aside.   He also applied to set aside the judgment  which  was  sealed  in  the  District  Court  following  the  delivery  of William J’s  3 September  judgment.    That  judgment  was  for  the  total  sum  of

$53,849.14.

[12]     Goddard J  considered  that  application  and  in  a  judgment  delivered  on

2 December 2013 directed that the amount of the judgment be amended to correct an error in the way the interest had been addressed when calculating the judgment amount.6   She noted that the consequence would be that the bankruptcy notice was to be amended and would need to be served again.  She observed that if Mr Bell wished to apply to set aside the amended notice he would need to do so within the time limit.

[13]     Mr Bell  has  filed an  appeal  in  the Court  of Appeal  against  Goddard J’s judgment.  There is no appeal against any of the judgments of Williams J, and the application for leave to appeal against his 11 July 2012 judgment has not been finally addressed.7

[14]     An amended bankruptcy notice was issued following Goddard J’s judgment.

Mr Bell has applied to set that notice aside.  He has also sought as application for a stay of execution on the judgment. Those applications are before me today.

6      BDO Manawatu Ltd v Bell [2013] NZHC 3189.

7      Bell v BDO Spicers Manawatu Ltd, above n 4, at [42].

[15]     I have taken the unusual step of discussing with the parties in the course of argument the unhappy situation which can arise, and with which this Court is well familiar, where judgment debtors who contest the validity of the judgments against them at the conclusion of the appropriate appeal process have sometimes, although solvent, refused to pay and judgment creditors have taken bankruptcy proceedings. This Court is all too well aware of cases in which that situation has led to the bankruptcy of otherwise solvent individuals, whose refusal to pay results from a refusal to accept the outcome of the judicial process.  There are instances where that has proved extremely costly to the judgment debtors concerned, both in financial terms and in terms of the effect on their lives.  Such cases can also be expensive both in time and money and stress to the judgment creditors involved.  I have urged upon Mr Bell the wisdom of his reflecting upon the extent to which it is in his interest to pursue his present course

[16]     I am concerned to achieve a way forward in this case (because it can be no more than a way forward) which seeks to minimise the risk of this becoming one of those unhappy cases.  In this case we already have the situation where an original fee, now held to be somewhere in the order of $4,000, has escalated to a judgment of almost $60,000.  I am concerned to achieve a situation where, if Mr Bell pursues his challenge by the procedures available to him as he is entitled to do, the focus is on the core issue and not on the incidental issue of enforcement.  One of the core issues which Mr Bell wishes to raise is whether the indemnity costs award in the District Court remains in force and, if so, whether the quantum is justified.   That latter question was not expressly addressed in this Court on the original appeal.

[17]     The appeal against Goddard J’s judgment does not directly raise the issues that Mr Bell seeks to raise going to the issue of whether he should be liable for the amount of the judgment.  Her decision is essentially now superseded by the amended bankruptcy notice.

[18]     Those issues, if they can be pursued in the Court of Appeal, could be raised only in the context of an appeal against William J’s judgments, particularly that of

11 July 2012.  Williams J has not expressly finally dealt with the application to him for leave to appeal against that judgment.  I consider that the appropriate next step is

that Williams J should finally determine the application for leave to appeal against his judgment, and I will direct that it be set down for further hearing before him.

[19]     Mr Bell has also indicated that he wishes to raise further evidence which was not before the District Court.8    I have explained to Mr Bell that any appeal will be heard on the basis of the evidence before the District Court, unless he successfully applies for leave to adduce fresh evidence on the appeal.  I treat his expression of wish to adduce this further evidence as an oral application for leave to adduce further evidence on appeal.  I will direct that this application is to be set down for hearing

before Williams J, with the application for leave to appeal.

[20]     I consider those are the appropriate steps to ensure that Mr Bell’s endeavours to challenge the judgment, if he elects to pursue that challenge, are addressed in a way which will enable a focus on the appropriate issues.

[21]     That leaves the question of what should now happen to the two applications before me.  The first is the application for stay of execution.   I have explained to Mr Bell that judgments of the Court are valid and enforceable unless and until they are set aside and they are payable.   If the appeal is subsequently successful the amount of the judgment is repayable.  Mr Darroch had suggested that if there is to be a stay, it should be on terms of payment of the amount into Court. That would be the conventional and appropriate response in most cases.  In this case I think a different approach is justified.  Payment of the money into Court would leave neither party satisfied.  This is a case where I do not discern that there is any substantial credit risk on either party.   Both parties have the means to pay, or to repay, the judgment amount. The only issue is willingness rather than ability.

[22]     In those circumstances I propose to order a stay of execution on terms that Mr Bell is, within seven days, to pay one half of the amount of the judgment, rounded to $27,500, to the judgment creditor.  Subject to that payment, the execution of the judgment will be stayed pending further order of this Court or of the Court of

Appeal.

8      This evidence is in the form of an affidavit from Mr Bell dated 19 May 2014, annexing a number of emails between the parties.

[23]     As to the bankruptcy notice, Mr Darroch asks that I do not set that aside, so as to require BDO to start again if it is necessary to take proceedings to enforce the payment of the balance.  The question whether, if BDO is successful, the existing bankruptcy notice will provide a sufficient basis to proceed, is not an issue that I need to address here.  I think the most convenient method of achieving the desired outcome is to adjourn the application to set aside the bankruptcy notice without setting any date of hearing.  I will adjourn it accordingly and direct that it is not to be brought on without prior notice.

[24]     Mr Darroch seeks costs on a 2B basis on the present application.   Mr Bell opposes that.   In all the circumstances I consider that both parties have had some success on the present application, so these costs on the present application should lie where they fall.

[25]     Mr Darroch asks that, before the application for leave to appeal is considered by Williams J, the transcript of the District Court hearing be obtained.   It was not available at the original hearing of the appeal.  I consider this step is appropriate.

Result

[26]     For these reasons, I make the following orders:

(a)      Execution  of  the  judgment  obtained  by  BDO  against  Mr Bell  is stayed,  on  condition  that,  on  or  before  26 May 2014,  payment  of

$27,500  is  made  to  BDO  by  Mr Bell  on  account  of  the  amount payable under that judgment.

(b)That stay will cease to apply if that payment is not made within that time.  Otherwise, the stay will remain in place pending a further order of this Court, or of the Court of Appeal.

(c)      Mr Bell’s application dated 28 March 2014 to set aside the bankruptcy notice  dated  4 October 2013  is  adjourned  sine  die,  and  may  be brought on for further hearing by not less than 21 days notice by either party.

(d)I direct that the application for leave to appeal against the judgment of Williams J dated 11 July 2012 be set down for further hearing before Williams J on a date to be fixed by him.

(e)      I direct that Mr Bell’s oral application for leave to adduce his affidavit dated 19 May 2014 be set down for hearing before Williams J at the same time as the leave application.

(f)      I direct that the Registrar arrange to obtain a transcript of the hearing before  Judge  Tuohy  in  the  District  Court  on  30  August  and

3 October 2011.   Any costs involved are to be met equally by the parties in the first instance.

(g)      There will be no order as to costs of the present hearing.

“A D MacKenzie J”

Solicitors:           Duncan Cotterill, Wellington, for Respondent

Copy to:            Mr Bell, Applicant