Callaghan Innovation v Johnson - [2021] NZHC 694

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001828

[2021] NZHC 694

UNDER The Insolvency Act 2006

IN THE MATTER OF

The bankruptcy of DAVID ALAN JOHNSON

BETWEEN

CALLAGHAN INNOVATION

Judgment Creditor

AND

DAVID ALAN JOHNSON

Judgment Debtor

CIV-2020-404-001928

BETWEEN

THECIRCLE.CO.NZ LIMITED
Applicant

AND

CALLAGHAN INNOVATION

Respondent

Hearing: 18 March 2021

Appearances:

R B Hucker and R F Selby for Judgment Debtor/Applicant D H McLellan QC and C D Boswell for Judgment Creditor/Respondent

Judgment:

31 March 2021

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

CALLAGHAN INNOVATION v JOHNSON [2021] NZHC 694 [31 March 2021]

Introduction

[1] There are two applications before the Court: an application to set aside a bankruptcy notice and an application to set aside a statutory demand.

[2] The applications arise out of a judgment against the judgment debtor, Mr David Johnson, and the company, Thecircle.co.nz Ltd (Circle), in respect of a non-party costs order in the sum of $1,274,268.00 That order was made by Powell J in Trends Publishing International Ltd (in rec and liq) v Callaghan Innovation.1

[3] Both Mr Johnson and Circle have appealed the costs order of Powell J to the Court of Appeal. The appeal was heard on 15 March 2021 and judgment is reserved.

[4] No stay of the costs judgment of Powell J has been applied for and no order made under r 12 of the Court of Appeal (Civil) Rules 2005 (stay of proceedings and execution).

[5] In both cases (i.e. the Bankruptcy Notice and the statutory demand) the judgment on which the debt is based is under challenge through the appeal process. Mr Johnson and Circle contend that this is recognised as a primary ground for the exercise of the Court’s inherent jurisdiction to set aside a bankruptcy notice or statutory demand (s 290(4)(c) of the Companies Act 1993). They place significant weight on the timing “proximity” of the appeal, namely that it has been heard and judgment of the Court of Appeal is imminent.

Background facts

[6] In his substantive judgment of 30 April 2019, Powell J dismissed in its entirety an action brought by way of counterclaim by Trends Publishing International Ltd (Trends) against the judgment creditor, Callaghan Innovation (Callaghan).2

[7] The counterclaim was filed following Callaghan, and other creditors, issuing proceedings to liquidate the company. Callaghan’s debt arose from a funding

1 Trends Publishing International Ltd (in rec and liq) v Callaghan Innovation [2020] NZHC 1626.
2 Trends Publishing International Ltd v Callaghan Innovation [2019] NZHC 907.

agreement with Trends under which it had agreed to provide funding for Trends’ research and development.

[8] Callaghan suspended and later terminated the agreement after it became aware of evidence that Trends was wrongly claiming expenses as research and development. Callaghan sued for the reimbursement of the wrongly claimed grant money. Trends counterclaimed seeking millions of dollars in damages, alleging that Callaghan’s suspension and termination of the funding agreement caused Trends’ business to fail.

[9]…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Callaghan Innovation v Johnson

Details

AGLC: Callaghan Innovation v Johnson [2021] NZHC 694
Case: [2021] NZHC 694
Decision Date: 31 March 2021

CaseChat Overview and Summary

In Callaghan Innovation v Johnson, the High Court of New Zealand heard two applications: to set aside a bankruptcy notice and a statutory demand. The underlying judgment, a costs order of $1,274,268.00, was being appealed by the judgment debtor, David Johnson, and the company Thecircle.co.nz Ltd. The key issue was whether the appeal of the underlying judgment could justify setting aside the bankruptcy notice and statutory demand. The court examined the inherent jurisdiction to control the abuse of process and the discretion to set aside a statutory demand under the Companies Act. The court found that the appeal alone did not provide sufficient grounds for setting aside the notices, as the appeal did not stay the execution of the judgment and the judgment was obtained through a reasoned determination. The court dismissed both applications, holding that the appeal did not create a substantial dispute about the debt, and ordered the applicants to pay costs.

The final orders of the court were:
- The application to set aside the bankruptcy notice is dismissed.
- The application to set aside the statutory demand is dismissed.
- The judgment debtor and the respondent (Mr Johnson and Thecircle.co.nz Ltd) are to pay costs to Callaghan Innovation on a joint and several basis.

Orders