Cassin v Wade Sawmill Pty Limited HC Auckland Ap155-Sw00

[2001] NZHC 251

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY AP155-SW00

BETWEEN HENRY MARK CASSIN
Appellant

AND WADE SAWMILL PTY LIMITED
Respondent

Date of Hearing: 4 April 2001

Counsel: SW Piggin (for appellant)
DA Watson (for respondent)

Judgment: 5 April 2001

RESERVED JUDGMENT OF HAMMOND J

INTRODUCTION

[1] This is an appeal against a decision of Morris DCJ, declining to strike-out, stay or dismiss a civil proceeding in the District Court. The central problem before the Judge was unusual, and involved what counsel described as cross-border insolvency issues. They said the issues are not directly covered by authority.

BACKGROUND

[2] Mr Cassin, the appellant, was living in Queensland. Wade Sawmill Pty Ltd (“Wade”) is a Queensland timber merchant. Mr Cassin guaranteed the trade debts of another Queensland company, Forest Lake Garden Centre Pty Ltd, in Brisbane, to Wade. Mr Cassin was a Director of that company.

[3] Forest Lake Garden Centre Ltd went into liquidation in 1997. Mr Cassin thereafter remained in Brisbane for about a year, and he assisted the Australian liquidators with respect to that liquidation. By December 1997 Mr Cassin had moved to New Zealand.

[4] In February of 1998, Wade issued proceedings in the Maryborough Magistrates Court, in Queensland, seeking judgment on the alleged guarantee. Wade obtained a judgment on those proceedings on 17 July 1998, for A$22,997.10 including costs and interest.

[5] Mr Cassin having moved to New Zealand, Wade then instituted proceedings on 1 December 1998 in the District Court at Auckland, by way of a summary judgment application. The Statement of Claim in support of that proceeding pleaded that judgment had been sought and obtained in Australia. It sought judgment for the sum for which judgment had been entered in Australia. So that was an action on the judgment.

[6] Mr Cassin protested the jurisdiction of the District Court on the grounds that:

(i) The Reciprocal Enforcement of Judgments Act 1934 (NZ) applied, and therefore the only enforcement proceedings which could be filed were proceedings in the High Court of New Zealand for registration; and

(ii) That Mr Cassin was not resident in Queensland when the judgment was obtained.

[7] Those proceedings came before Hubble DCJ on 29 April 1999. The day before that hearing, an Amended Statement of Claim was filed which (more correctly) repleaded the case as a failure to pay on a guarantee, despite demand.

[8] In the result, after hearing counsel Hubble DCJ adjourned that application, because Wade agreed to apply for registration of its Australian judgment in this Court. But the understanding was that if Wade was unsuccessful in the High Court, it could bring the District Court application for summary judgment on again.

[9] Wade made application to this Court for registration of the Queensland judgment on 14 June 1999. But unbeknown to Wade, Mr Cassin had declared himself bankrupt in the State of Queensland on 11 June 1999. He did not advise Wade that he had declared himself bankrupt, until after he was served with the originating application for registration.

[10] Mr Cassin then filed a Notice of Opposition to this originating application for registration. He said that the Queensland judgment could not be enforced in Queensland (by virtue of Mr Cassin’s bankruptcy). For, enforceability of the judgment in New Zealand was a prerequisite to the respondent being able to register the judgment in New Zealand under s4 of the Reciprocal Enforcement of Judgments Act.

[11] Once Wade had been apprised of Mr Cassin’s Australian bankruptcy, it discontinued its High Court application. Wade then sought to, as Ms Watson termed it, “revive” the District Court proceedings. The Amended Statement of Claim in that proceeding is a common law claim, on the guarantee, seeking payment of the amount alleged to be in default of A$19,234.50 plus interest at the rate of 11% per annum from January 1997 down to the date of judgment.

[12] Mr Cassin’s response to that course was to bring an application (which was made in reliance on RR139, 209 & 481 of the District Court Rules 1992) that this Statement of Claim “be struck-out, stayed or dismissed” on the grounds that the proceeding is:

•   Frivolous or vexatious.

•   An abuse of the process of the Court.

•   Oppressive.

[13] Although the application says that the strike-out application is with respect to a “Second Amended Statement of Claim”, it is plainly the First Amended Statement of Claim of 28 April 1999 to which the application referred.

[l4] I will have to come to the grounds of the application in closer detail later in this judgment, but for present purposes it suffices to note that Mr Piggin’s complaint is that what Wade had done was quite unfair. He characterised it as an “evasion” of the Australian bankruptcy adjudication, by the proceeding now being advanced in New Zealand.

THE DISPOSITION OF THE APPLICATION IN THE DISTRICT COURT

[15] Morris DCJ dismissed the application. I had some difficulty in following precisely the basis on which the Judge did so. His Honour seems to have been influenced by, and discussed at some length, the possibility, as he saw it, that there were other possibilities open to Wade which it could have, “but has chosen not to pursue, namely, seeking recognition in New Zealand of the Queensland Magistrates Court judgment under the common law, or entering a memorial pursuant to [s56 of] the Judicature Act”. His Honour specifically held “the fact that the plaintiff was not able to register the judgment under the Reciprocal Enforcement of Judgements Act did not act as a bar to the issue of new proceedings against the defendant in New Zealand ...”.

[16] Mr Cassin then sought leave to appeal that interlocutory ruling by Morris DCJ, to this Court. Leave was granted by Judge Joyce QC, on 26 October 2000.

RESOLUTION

Narrowing the issues

[17] The argument in the District Court seems to have ranged quite widely, and in fairness to a hard pressed District Court Judge, that may have contributed to what was said in his judgment. In an effort to bring the relevant issues more sharply into focus, there was an exchange between counsel and myself this morning, which I at least found helpful, and which simplifies the issues for determination somewhat.

[18] The first point to note is that the relevant claim which is sought to be stayed is an orthodox common law action on the guarantee by the First Amended Statement of Claim in the District Court at Auckland, to which I have already referred.

[19] The second point to note is that Mr Cassin’s application to strike-out is with respect to that proceeding, and that proceeding only: it does not refer to any other prospective steps which may be open to Wade, either before or subsequently to it obtaining any judgment which may be open to it in that proceeding.

[20] The third point to note is that the situation has not yet been reached where any form of execution had been attempted against Mr Cassin, because there is no judgment. Still less is there any present question of bankruptcy of Mr Cassin in New Zealand. The practical forensic context has to be borne firmly in mind: if Wade gets judgment in New Zealand (which is all it is presently seeking) then it might attempt attachment or some other form of execution.

[21] Of course, ultimately, Wade might also seek a bankruptcy adjudication of Mr Cassin in New Zealand. At that point, doubtless many of the arguments which were canvassed before me this morning as to the propriety or otherwise of an adjudication of Mr Cassin in New Zealand would likewise also be raised. It requires little imagination to see that the unfairness of having Mr Cassin adjudicated both in Australia and New Zealand would be raised; it would be said that the amount of money involved is small; and it would be said that bankruptcy jurisdiction should not be used for a debt collection exercise. All of those kinds of concerns are dealt with by Masters, almost on a daily basis, and need not be enlarged upon further by me here.

The arguments for Mr Cassin

[22] I think I do Mr Piggin’s submissions no injustice if I record that under the general umbrella of “unfairness”, he emphasised these factors:

• It is anomalous, at least in Mr Cassin’s case, that the assignment to the Australian Trustee upon bankruptcy and the discharge after three years are recognised, but Mr Piggin said, effectively the stay under s58(3) of the Australian statute would not be.

• All of Mr Cassin’s assets were assigned to the Australian Official Trustee upon his bankruptcy.

• As a matter of comity, the Australian bankruptcy ought to be accorded recognition in New Zealand.

• If Wade were ultimately to obtain a New Zealand judgment, there are no assets to attach here, and no assets to vest on the New Zealand bankruptcy.

• Further proceedings in New Zealand are otiose and wasteful of the New Zealand’s court’s time and resources.

• The proceeding is not needed to obtain equality of distribution between creditors.

• Mr Piggin suggested that Wade is “approbating and reprobating” insofar as, he submitted, Wade accepts that s58(3) is effective to stay the registration of the judgment application, but not the effect of the same provision to stay existing or new proceedings.

• Mr Piggin submits the law of the contract is entirely Australian. There is no local law to apply, or assets within the jurisdiction.

• Wade’s New Zealand proceedings is an abuse of process in that it is vexatious, in relitigating the matter which has earlier been stayed

The arguments for Wade

[23] Ms Watson submitted that:

•   The effect of the Australian bankruptcy cannot be that the debtor is thereby effectively bankrupted in New Zealand, so that no proceeding can be brought against him. She said the issue is not one of recognition of the Australian bankruptcy, but the effect of that recognition.

•   The law of the contract is not Australian, but in any event, that is not relevant.

•   The present New Zealand proceeding is not an attempt to relitigate.

•   The existence of s135 of the Insolvency Act 1967 (NZ) will not necessarily assist Wade, because a New Zealand court has a discretion as to whether it chooses to supply assistance.

•   The object of the present litigation in New Zealand is not necessarily bankruptcy - Mr Cassin could obtain assets between this point of time and the date of any bankruptcy, if he were to be bankrupted, which could be attached.

•   Considerations of commercial reality should also preclude the application being granted.

RESOLVING THE ARGUMENTS

[24] In my view, the Judge was correct to dismiss the application, though my reasons differ from that of the Judge.

[25] I have some difficulty in seeing, for present purposes, the relevance of the other modes of proceeding which might be open to Wade, as a reason for dismissing the application. It seems to me that abstract argument about what else Wade might or might not have been able to do obscured the issues. This was an abuse of process application which was brought with respect to the specific claim which had been lodged in the District Court at Auckland. The argument did not need to be any wider than that.

[26] When the application is approached in that manner, it can be seen more clearly for what it is - a relatively traditional abuse of process application.

[27] In Hunter v The Chief Constable of the West Midlands Police [1982] AC 529, at 537, Lord Diplock defined that concept in this way:

“... This is a case about abuse of the process of the High Court. It concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way in which, although not inconsistent with the literal application of its procedure rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people. The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this house were to use this occasion to say anything that might be taken to limiting to fixed categories the kinds of circumstances in which the court has a duty (I avow the word discretion) to exercise this salutary power.”

[28] In this instance, the two broad heads into which the various arguments can fairly be organised as suggesting an abuse of process, are relitigation; and broad unfairness.

[29] Before I turn to those matters in more detail however, I should state what, on my appreciation, is the fundamental legal principle which applies where a defendant has been adjudicated abroad, but a plaintiff nevertheless elects to proceed against that defendant, in this jurisdiction. That fundamental principle is that merely because a defendant has been adjudicated bankrupt abroad cannot, of itself, preclude a plaintiff in New Zealand from continuing his or her suit.

[30] I refer to Smart, Cross Border Insolvency (Butterworths (1991), at p146. And, for judicial authority, see Re Matheson Bros Ltd, (1884) 27 ChD, 225, per Kay J, at p30:

“This court upon principles of international comedy would not doubt have great regard to that winding up [one of the New Zealand courts] and would be influenced thereby, but the question of jurisdiction is a different question, and the mere existence of a winding up order made by a foreign court does not take away the right of the courts of this country to make a winding up order here, though it would not doubt exercise an influence upon this court in making the order.”

[31] I did not understand Mr Piggin to take issue with those fundamental principles: that there is no absolute rule in the favour of his interests and the onus is on Mr Cassin to establish why the instant proceeding should not be entitled to proceed.

[32] It is convenient at this point to deal with s135 of the Insolvency Act 1967 (NZ) at this point, because, apart from that section, there is no statutory provision applying in New Zealand for New Zealand courts to deal with cross border insolvency issues.

[33] That section provides that in the case of bankruptcies, the New Zealand High Court shall:

“In all matters of bankruptcy act in aid of and be auxiliary to any court of any Commonwealth country other than New Zealand, being a court having jurisdiction in bankruptcy, and an order of that court requesting aid shall be sufficient to enable the High Court to exercise in regard to the matter specified in the order such matters as the High Court might exercise in respect of the matter, as if it had arisen within its own jurisdiction.”

[34] Unlike the view taken by Australian courts in that country’s own equivalent of this section (s29(1) Bankruptcy Act 1 966 (Cth)), the word “shall” in the section has been held to be directory, not mandatory (see Re Beadle (High Court, Auckland, 1 September 1980, B116/80, Barker J). In Australia, on the other hand, the word “shall” has been interpreted as being mandatory (Ayres v Evans [1981] 39 ALR 129). Ms Watson’s submission; which I think has to be correct for present purposes, is therefore that assistance under s135 may well be problematical.

[35] The next statutory provision matter that needs to be set to one side, is s58(3) of the Bankruptcy Act 1996 (Australia). It cannot be right that this provision applies in New Zealand. Otherwise, then no person could be bankrupted in New Zealand where bankruptcy had already occurred in Australia. (See Re Mathson, (supra); and Hamilton v Grose (High Court, Christchurch, B404/92, per Tipping J). There is also considerable force in Ms Watson’s argument that the application of that section in New Zealand would also be contrary to commercial reality. Non-bankrupted debtors could flee Australia with debts, taking steps to ensure that all assets were also removed to New Zealand. Then the debtor could escape the grasp of creditors attempting to bankrupt him in New Zealand, by declaring voluntary bankruptcy in Australia.

[36] I have therefore, reached the point where, as I view matters, there is nothing in the statutory provisions to which I have referred which assists Mr Piggin’s client in a relevant way. I therefore turn to the questions of relitigation and unfairness.

[37] As to “relitigation”, it is a gross over-simplification to say that this matter falls into that category. Effectively, the case has never been litigated to fruition in New Zealand, because of the steps taken by Mr Cassin, and the technical difficulties that Wade have encountered. The bulk of those difficulties have been created by Mr Cassin. In particular, there was his failure to disclose that he had voluntarily applied for bankruptcy in Australia. I do not think there is any force at all in that argument.

[38] The double bankruptcy problem is a troublesome one. In one sense it is a form of double jeopardy, and as Mr Piggin rightly said, the effect of a double adjudication would, in this case, inter alia, be to extend the temporal frame of adjudication. (By that I mean that the total period of time - as a bankrupt - could, and almost certainly would be extended; and, an early discharge in New Zealand would be discretionary). Some of the commercial and policy considerations which would attend on an evaluation of this kind were canvassed before me this morning in argument. Those considerations might extend as far as due process or even Bill of Rights arguments. I can see why, in a broad sense, Mr Piggin has endeavoured to characterise a double bankruptcy in these circumstances as being broadly “unfair”.

[39] However, for present purposes the answer to that proposition must surely be that - on the facts as they stand - something of a straw man is being set up. Courts have long resisted having to resolve hypothetical questions, in the absence of a concrete set of facts. Practically speaking, it is not in the interests of Wade to reach the position of an adjudication without having first exhausted the possibilities of attachment or other forms of execution. The adjudication problem may just never arise. And if it does, Mr Piggin’s interests are protected in that the arguments which he addresses to the Court now, could be addressed then.

[40] On the other side of the line, Ms Watson urges that Mr Cassin accumulated very substantial debts in Australia, and that there is something to be said, in commercial terms, for allowing judgment to go against him in New Zealand, if it can be had, in effect as a kind of “warning” to others having dealings with Mr Cassin here.

CONCLUSION

[41] In the event, I take the view that the present New Zealand proceeding should be allowed to proceed to judgment, and that normal execution processes could legitimately then follow. There is nothing in the underlying principles which precludes the course which Wade presently proposes to adopt. Quite what the position should be, if, and when, the matter comes to a New Zealand bankruptcy adjudication, is not something that I need to determine now, and I do not determine it.

[42] In the result, the appeal is dismissed.

[43] Wade will have costs of $3,000 on the appeal, together with its disbursements, if necessary as certified by the Registrar.

Appeal dismissed.