Cardno (NZ) Limited v Stokes - [2023] NZHC 1204

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-134

[2023] NZHC 1204

UNDER the Insolvency Act 2006

IN THE MATTER

of an application pursuant to s 17 of the Act

BETWEEN

CARDNO (NZ) LIMITED

Judgment Creditor

AND

COLIN PETER STOKES

Judgment Debtor

Hearing: 17 April 2023

Appearances:

M R C Wolff for Judgment Creditor Judgment Debtor in person

Judgment:

23 May 2023

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] On its face, this is an application by the judgment debtor, Mr Colin Stokes, pursuant to s 17 of the Insolvency Act 2006 for an order setting aside a bankruptcy notice dated 15 April 2021 served on him by the judgment creditor, Cardno (NZ) Ltd, on or about that date.

[2] In his notice of application, Mr Stokes says that he has a “counterclaim, set-off, or cross-demand against the judgment creditor Cardno — that equals or exceeds the amount claimed by the judgment creditor Cardno”. He also says that “new evidence has been obtained that could not be put forward in the action or proceeding in which the judgment or order was obtained”.

CARDNO (NZ) LIMITED v STOKES [2023] NZHC 1204 [23 May 2023]

[3] Mr Stokes did not argue the case on either of those bases. Rather, he contended that the Court should set aside Cardno’s bankruptcy notice because the judgment on which it was based was tainted by fraud.

[4] The judgment debt upon which the bankruptcy notice is based arises from litigation commenced by Mr Stokes and others as long ago as August 2014. It is a costs award. Whilst it is unnecessary to go into the details of the litigation, it may be helpful to describe some aspects.

[5] In 2002 Messrs Stokes and others purchased land in a yet to be completed subdivision from Noble Investments Ltd (NIL). NIL had engaged Apple Fields Ltd (AFL) to provide project management services and Cardno to provide planning, surveying and engineering services. The individuals at AFL and Cardno who appear primarily to have been involved in the project were Mr Justin Prain (AFL) and Mr Richard Graham (Cardno).

[6] The development got underway after NIL secured the rezoning of the property in August 2006. The venture failed and in August 2014 Mr Stokes and one of his colleagues, Mr Gregory Smith, commenced a proceeding in which they claimed that NIL had breached contractual obligations to them and that AFL, Mr Prain and Cardno were also liable in respect of resulting losses. The defendants all entered defences and NIL and AFL counterclaimed.

[7] In mid-2018, NIL and AFL were wound up and struck from the register, resulting in the proceedings against those companies being stayed. The case against Mr Prain and Cardno remained on foot. The claims against Mr Prain and Cardno included allegations that both had acted fraudulently.

[8] In December 2019 Mr Prain and Cardno filed and served applications pursuant to r 15.1 of the High Court Rules 2016 for…

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.

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Details

Case: [2023] NZHC 1204
Decision Date: 23 May 2023

CaseChat Overview and Summary

In the High Court of New Zealand, Cardno (NZ) Limited, a judgment creditor, sought to enforce a costs award against Mr Colin Peter Stokes, the judgment debtor, through a bankruptcy notice issued under the Insolvency Act 2006. Mr Stokes applied to set aside the bankruptcy notice, contending that the underlying judgment was tainted by fraud. The court was required to decide whether the bankruptcy notice could be set aside based on the grounds provided under section 17 of the Insolvency Act 2006 and whether there was any fraud or perjury that vitiated the judgment. The court also needed to consider whether the application was an attempt to re-litigate the merits of the original judgment, which is not permissible in such proceedings.

The court rejected Mr Stokes' application to set aside the bankruptcy notice. It found that Mr Stokes' argument that the judgment was tainted by fraud was not credible. The court noted that Associate Judge Lester's judgments were based primarily on procedural failings rather than any assessment of the cause of action, and it was not obvious that the evidence in question was influential. The court also held that the affidavit evidence under attack was given in different proceedings and was not directly influential in the determination of the strike out application. The court further found that Mr Stokes had not established that Mr Graham perjured himself. The court dismissed Mr Stokes' application for an order setting aside the bankruptcy notice and extended the time for Cardno to commence bankruptcy proceedings. The court reserved the decision on costs, indicating a preliminary view that Cardno was entitled to a costs order on a standard basis.

Orders