Burrows v Container Sales & Leasing Limited HC Christchurch CIV 2009-409-1712

[2010] NZHC 973

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2009-409-001712

BETWEEN  JOHN BURROWS Applicant/Judgment Debtor

ANDCONTAINER SALES & LEASING LIMITED

Respondent/Judgment Creditor

Hearing:         21 June 2010

Appearances: Applicant/Judgment Debtor in person

A N Riches for Respondent/Judgment Creditor

Judgment:      22 June 2010

JUDGMENT OF ASSOCIATE JUDGE DOHERTY

The application

[1]     The applicant/judgment debtor (“Burrows”) has applied under s 119(2) Insolvency Act 2006 for an order that property disclaimed by the Official Assignee be returned to him.  The application is resisted by the respondent/judgment creditor (“CSL”).

The facts

[2]      Burrows leased a shipping container from CSL.  He used it to store his horse training  equipment.    He  fell  down  on  the  payments  under  the  lease,  and  on  3

September 2007 CSL physically uplifted the container from the debtor’s property.

The container contained Burrows’ horse training equipment.

BURROWS V CONTAINER SALES & LEASING LIMITED HC CHCH CIV-2009-409-001712  22 June 2010

[3]      Burrows   issued   proceedings   following   removal   of   the   container   and ultimately, on 16 June 2008, there was a settlement of that proceeding wherein Burrows was to pay the rental arrears ($948.40) and purchase the container ($2475). Burrows did not pay.   CSL obtained summary judgment against Burrows for the settlement figure and costs ($5614.56).   Burrows issued other proceedings which were struck out as an abuse of process.  Throughout this CSL maintained possession of the container and its contents.  There is no evidence filed in this application as to the value of the equipment.   Burrows did produce a document purporting to be a valuation but it was not evidence.  A perusal of an inventory leads me to the view the value is not substantial.

[4]      Acting on the judgment, CSL bankrupted Burrows.

[5]      CSL claims a lien over the contents of the container and seeks orders that it be entitled to sell those goods in order to satisfy the judgment sum, together with costs obtained on the bankruptcy (total $8294.56).   CSL has not made its own application under s 119(1) Insolvency Act 2006.

Possessory lien

[6]      CSL sought to characterise its right as a possessory lien, but in argument accepted that at its highest its rights in equity could only amount to an equitable lien. I agree with CSL that this is not likely a possessory lien because:

i)The storage of goods does not create a possessory title (Hatton v Car Maintenance Co Limited [1915] 1 Ch 621).

ii)There is insufficient nexus between CSL and the goods (other than the fact of possession) or CSL and Burrows (in contract) so as to create a possessory lien.

iii)CSL took possession of the goods because it took possession of the container under the lease arrangement.   It was coincidental the goods were in it.

iv)      The lease gave right to the container but not the goods.

v)       Taking possession did not enhance the goods or their value.

Equitable lien

[7]      An equitable lien arises “by operation of equity from the relationship between the parties rather than by act of the parties” (Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 184) or from their conduct (Ashton Group Ltd v Ambrosia Holdings Ltd HC Auckland CP198/SW01, 26 June 2001, Morris J.

[8]      The contractual arrangement was lessor/lessee wherein title in the container remained with CSL and it had the right to determine the lease and retake possession of the container.  The contract was silent as to the status of what might have been in it.   At law, Burrows was entitled to possession of the goods but failed to demand such despite being advised of his right to do so by a District Court Judge (Burrows v Gordon and Anor DC Christchurch CIV-2009-009-001281, 14 July 2009, Judge Somerville).  Up until the failure to pay the judgment sum, there is no evidence of Burrows’ inability to pay.

[9]      Equitable liens commonly arise in the sale and purchase of land, personal property and goods or at the suit of an unpaid purchaser (Ashton Group at [34]).

[10]     CSL submits it has such a lien because Burrows “refused to retrieve the goods at any point prior to its [sic] bankruptcy”.

[11]     I  do  not  accept  that  submission.    Burrows  has  maintained  his  right  to ownership and/or possession, and the fact he has not seen fit to uplift them does not create an additional benefit to CSL.

[12]     In an attempt to define the requirements for an equitable lien to be imposed, Deane J in Hewett v Court [1983] 149 CLR 639 at 668 posited one requirement thus:

That  the  property  be  specifically  identified  and  appropriated  to  the performance of the contract…

[13]     In this case, the goods had nothing to do with the contract to lease.   For example it was not a condition of hire that it be used for storage of Burrow’s training gear.

[14]     I incline to the view CSL did not have an equitable lien.

Section 119

[15]     Burrows has applied pursuant to s 119 of the Insolvency Act 2006.  Section

119(3) provides a wide discretion to the Court to order that the disclaimed property be delivered to the applicant “if it is satisfied that it is fair that the property should be delivered to… the applicant”.

[16]     Is it “fair” that Burrows should have the goods delivered to him?

[17]     CSL says it is not, but surprisingly CSL itself has not applied for orders in its favour (s 119(1)(b)).

[18]     There  is  no  evidence  from  the  Official  Assignee,  or  anyone  other  than

Burrows, as to the extent of the bankrupt estate.  I was advised from the bar:

i)The only apparent assets of Burrows’ bankrupt estate are these goods at issue in this application and personal effects. Therefore, as the Official Assignee has disclaimed, there will be nothing for CSL from the bankrupt estate.

ii)       CSL would have no likelihood of recompense at all from the

Official Assignee in respect of its judgment sum. iii)   CSL is the only creditor.

If this is the case, CSL should have put evidence before the Court.

[19]     The judgment for which CSL bankrupted Burrows was for $5614.56, and that figure included costs on the summary judgment ($1290), interest ($576.16) and the

price of the container ($2475).  CSL retains the container, which one might assume was still worth the purchase price.   Therefore, without costs and interest, CSL proceeded to bankruptcy for an original debt of $948.40 (the arrears of rental).  All the while, Burrows was deprived of possession of the goods upon which he was reliant  for  his  living  as  a  horse  trainer.    He  has  been  unable  to  carry  on  that occupation as, because of his bankruptcy, he cannot afford to replace the required equipment.

[20]     CSL had  possession  of  his  goods  by virtue of  its  opportunism.    It  took possession of the container without notice, despite the requirement to give notice in the lease (cl 27).   Had notice been given, Burrows is likely to have removed the goods.

[21]     I take into account, in the exercise of my discretion, the fact that Burrows has not helped the situation by his subsequent actions.  As Judge Somerville put it in his judgment of 14 July 2009:

Neither party has covered themselves with glory in this case.  Mr Burrows would have been well advised to get himself a lawyer 20-odd months ago. He would have had his goods back within days and would not have incurred the losses he now says he has.

Burrows has not helped by his use of pejorative and accusatory language in his affidavits and submissions before this Court.

Outcome

[22]     But on balance I consider it is fair that Burrows regain the disclaimed items. I grant the application and order CSL to deliver to Burrows all items retained in the storage container located at the premises of CSL.

[23]     To give effect to this order, I further order that:

i)        At an agreed time Burrows will attend at the premises of CSL

to take delivery of the items.

ii)       Taking delivery shall be at the cost of Burrows in all respects.

In the interests of certainty, that means CSL should not be responsible for any costs incurred by Burrows to take delivery.

iii)Unless within 28 days of the date of delivery of this judgment Burrows uplifts the items and removes them from CSL’s premises, the primary order shall lapse and property in the goods shall vest in CSL, which shall then be authorised to sell them  at  public  auction  and  appropriate  the  net  proceeds towards the judgment sum.

[24]     There are no orders for costs.

ASSOCIATE JUDGE DOHERTY

Solicitors:

Saunders & Co, Christchurch

Copy to Applicant/Judgment Debtor