Bignell v Nelson Sun Club Incorporated
[2020] NZHC 1553
•3 July 2020
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2019-442-81
[2020] NZHC 1553
UNDER the Insolvency Act 2006 BETWEEN
GARY ARTHUR BIGNELL
Applicant
AND
NELSON SUN CLUB INCORPORATED
Respondent
Hearing: 29 June 2020 (By AVL) Counsel:
L F McDonald for Applicant G J Praat for Respondent
Judgment:
3 July 2020
Reissued:
15 July 2020
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was re-issued on 15 July 2020 under the slip rule.
This judgment was delivered by me on 3 July 2020 at 3.00pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 3 July 2020
BIGNELL v NELSON SUN CLUB INCORPORATED [2020] NZHC 1553 [3 July 2020]
[1] The applicant, Gary Arthur Bignell (Mr Bignell), seeks that a proposed cause of action disclaimed by the Official Assignee be vested in him, pursuant to s 119(2) of the Insolvency Act 2006 (the Act).
[2]Section 119 of the Act provides:
119 Position of person who suffers loss as result of disclaimer
(1)A person suffering loss or damage as a result of disclaimer by the Assignee may—
(a)claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the Court under paragraph (b):
(b)apply to the Court for an order that the disclaimed property be delivered to, or vested in, that person.
(2)The bankrupt may also apply for an order that the disclaimed property be delivered to, or vested in, the bankrupt.
(3)The Court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant.
[3] Mr Bignell was adjudicated bankrupt on 15 September 2016 and discharged on 20 September 2019. On 10 September 2019, the Official Assignee disclaimed any interest in the cause of action Mr Bignell seeks to be vested in him. At the time of the disclaimer, Mr Bignell’s solicitors had prepared a draft statement of claim setting out the cause of action and the disclaimer cross-referenced to that draft claim. Mr Bignell’s draft statement of claim is produced to the Court.
[4] The application is opposed by the proposed defendant in those proceedings, Nelson Sun Club Incorporated (the Sun Club).
Legal principles
[5] Both counsel referred to Moore J’s decision in Robinson v IAG New Zealand Ltd, both referring to the following passage:1
1 Robinson v IAG New Zealand Ltd [2016] NZHC 3149 at [50].
The effect of this provision is that the Court enjoys a broad and largely unfettered discretion. It may make an order under s 119(2) if it consider it is “fair” to do so. In the absence of restrictive language in subsection (3), I consider this assessment should be made in an holistic manner and in light of all the surrounding circumstances the Court considers relevant.
[6] Mr McDonald, counsel for Mr Bignell, highlighted that this application involves an access to justice issue.2 While Mr McDonald did not put it in this way, I took his submission as being that because the court should be cautious in inhibiting a right of access to the court, unless there were other factors standing squarely against the application being granted, fairness would generally favour a cause of action being vested in Mr Bignell.
[7] Mr McDonald referred to my decision in Burgess v Beaven, that fairness also involved considering the strength of the proposed claim (vesting not being appropriate if the claim was not reasonably arguable), the effect of delay in the claim being brought and finally the interests of the proposed defendants.3
[8] Mr McDonald suggested that a similar standard to that in a defendant’s summary judgment application was a helpful analogous standard to assessing the proposed strength of the claim. The submission was if a claim was reasonably arguable, then in the absence of some compelling factor, an applicant seeking that a disclaimed cause of action vested in them should be allowed their day in court.
[9] Mr McDonald submitted an application for vesting was not the forum in which to conduct a trial of the cause of action sought to be vested. Counsel submitted:
If there are factual disputes that cannot be resolved without a full trial, it [the court] will not decline the vesting order on this basis. However, if it is apparent on the affidavit evidence that the claim is legally or factually unsustainable [the court] will decline the order.
I agree with that submission.
2 Mr McDonald referred to Independent Fisheries Ltd v Minister for Canterbury Earthquake Recovery [2012] NZHC 1810, where Chisholm J said that access to the Court is “…deeply embedded in the law[s]…” of New Zealand at [162]; and that the right of access to the Courts was a fundamental right at [163].
3 Burgess v Beaven [2020] NZHC 497 at [18].
[10]Ultimately, as Toogood J observed in Goldstone v Goldstone:4
… all of the surrounding circumstances should be taken into account so far as they bear on what the Court may consider just, but the Court’s decision must reflect the context in which the application is made.
The facts of the present application
[11] Mr Bignell and his wife (Mrs Bignell) were members of the respondent. On 10 February 2018, the Sun Club held a Special General Meeting (the February Meeting) at which a vote occurred expelling Mr Bignell as a member.
[12] Mrs Bignell resigned her membership on 8 February 2018. The draft statement of claim says she did so, having no confidence that the issue of her expulsion would be dealt with fairly by the Sun Club. In the draft statement of claim, Mrs Bignell brings a claim in her own right in respect of what, in effect, is a claim of constructive expulsion. She also brings a separate claim relating to losses said to have been incurred in the removal of a sleep-out she claims she owned which had been located on the Sun Club’s land. Members of the Sun Club were able to locate sleep-outs or caravans on the Sun Club’s property and pay a licence or rental fee accordingly.
[13] The Sun Club says the February Meeting was prompted by the fact Tasman District Council (TDC) had issued a Notice to Fix in respect of non-compliant aspects of Mrs Bignell’s sleep-out, in particular that it had been located within five metres of the boundary. That Notice was dated 18 July 2017. The Sun Club says it passed the Notice to Fix on to the Bignells in late July 2017 and agreed to the Bignells’ request for an extension of time to comply with the Notice, the extension being given to 18 December 2017.
[14] The Sun Club says the Bignells failed to address the issue in the Notice to Fix which resulted in TDC issuing an abatement notice on 2 February 2018.
[15] The draft statement of claim includes a damages claim by Mrs Bignell relating to the sleep-out, a cause of action by Mrs Bignell relating to the circumstances in
4 Goldstone v Goldstone [2019] NZHC 1649 at [18].
which she resigned from the Sun Club. Mr Bignell seeks to join in that cause of action on the basis that his expulsion was:
(i)without any reasonable basis and in breach of his contract with the Sun Club; and/or
(ii)was brought for an improper purpose or on a bad faith basis.
[16] The membership claim is pleaded as a breach of contract; the contract being the Constitution between the Sun Club and its members. Mr McDonald submits a member’s ability to enforce the rules of an incorporated society as a control is a recognised cause of action and he referred to cases where such claims have been successfully brought.5
Respective arguments
[17] As noted above, Mr Bignell says the cause of action he wishes to pursue is one recognised by the court. To the extent the claim depends on factual issues, which cannot be resolved in a summary application such as this, he says the presence of such disputes does not mean he does not have a reasonably arguable cause of action.
[18] Mr Bignell says he has not delayed matters unduly. Mr McDonald notes the Sun Club does not raise delay in its notice of opposition. Some delay has occurred. The date of the meeting of which Mr Bignell complains was 10 February 2018. This application was commenced at the start of December 2019. However, the Sun Club does not suggest any prejudice flowing from the delay.
[19] As far as the interests of the Sun Club are concerned, other than the normal detriment of being involved in proceedings, the Sun Club does not point to any particular detriment. Significantly, Mr Bignell says Mrs Bignell will be bringing her claim in any event.
5 See Church v Commerce Club of Auckland [2006] NZAR 494 (HC); Henderson v Kane & Pioneer Club [1924] NZLR 1073 (SC); Millar v Smith [1953] NZLR 1049 (SC); Gibson v New Zealand Land Search and Rescue Dogs Inc [2012] NZHC 1320; Byrne v Auckland Irish Society Inc [1979] 1 NZLR 351 (SC).
[20] Accordingly, the Sun Club is going to be involved in proceedings concerning the process by which Mrs Bignell was “constructively expelled” from the Sun Club which will require a consideration of issues very similar, if not identical to those, Mr Bignell wishes to raise.
[21] The Sun Club’s submissions seek to justify the circumstances leading to the vote at the February Meeting noting Mr Bignell did not attend. The Sun Club says the effect of Mr Bignell’s claim is that he now wants to litigate what occurred at the February Meeting more than two years after the event and that it is not fair to the members, who having dealt with the issue at the time, are now being asked to justify what occurred. The Sun Club says the time for Mr Bignell to advocate for his position and persuade his fellow members that he should continue to be a member has come and gone.
[22] The Sun Club submits it is unfair to now endeavour to unwind the decision made by Mr Bignell’s fellow members. The submission is that the right of members to govern their own affairs in accordance with their Constitution should be respected. A final decision was made and should stand. Mr Bignell chose not to attend the February Meeting, so must live with the outcome.
[23] The reality, however, is that Mr Bignell is saying the process by which he was removed as a member was tainted as he says it was commenced for an improper purpose or was brought on a bad faith basis or in breach of the rules of natural justice. Hence, Mr Bignell says it is no answer to say he should have engaged in an unfair process.
[24] At the hearing, Mr McDonald advised the Court his instructions were that the Bignells did not receive the email notification of the February Meeting. In a memorandum filed after the hearing, Mr McDonald corrected that advice. Mr Praat accepted it was proper for that correction to be given, albeit he objected to the balance of Mr McDonald’s memorandum that sought to address the effect of the correction. Mr McDonald’s client, upon checking emails, accepted notice was given of the February Meeting. Having properly brought the correct state of affairs to the Court’s attention, I considered the brief submissions made as to its effect. While the
acknowledgment weakens the Bignells’ argument that they were not given notice of the February Meeting, an issue remains as to whether the notice gives sufficient details of how the Bignells’ conduct was a breach of the rule relied on by the Sun Club. Nor is the fact notice was given an answer to the claim that the expulsions were initiated in bad faith.
[25] I am satisfied it is fair that the cause of action disclaimed by the Official Assignee be vested in Mr Bignell and there is an order accordingly.
[26] Mr Bignell’s claim includes seeking an order that his membership of the Sun Club be restored. This claim was one the Official Assignee had no incentive to pursue, whatever its merits. Mr Praat, counsel for the Sun Club, accepted the claim Mr Bignell sought to pursue raised numerous factual issues – I agree. The place for such to be determined is a hearing unless the factual position of one party can be dismissed.6
[27] At the end of the day, Mrs Bignell will be bringing her proceeding covering in respect of the same membership issues. I do not consider it is unfair to the Sun Club for Mr Bignell’s claim to be pursued at the same time. The Sun Club as defendant in these proceedings will be free to apply for security for costs if it thinks that is appropriate.
[28] There is an order in terms of paragraph 1(c) of the originating application dated 5 December 2019.
Associate Judge Lester
Solicitors:
Hamish Fletcher Lawyers, Nelson Knapps Lawyers, Nelson
6 By applying the standard from Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341E.
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