Cummins v Body Corporate 172108

[2023] NZHC 3169

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-458

[2023] NZHC 3169

UNDER

the Insolvency Act 2006

IN THE MATTER

of bankruptcy proceedings

BETWEEN

ROBERT JAMES CUMMINS

Judgment Debtor/Applicant

AND

BODY CORPORATE 172108

Judgment Creditor/Respondent

Hearing:

12 October 2023

Appearances:

Judgment Debtor in person

J B Orpin-Dowell for Judgment Creditor

Judgment:

10 November 2023

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                 In this proceeding, the judgment creditor, Body Corporate 172108, is seeking an order bankrupting the judgment debtor, Mr Robert Cummins, pursuant to s 36 of the Insolvency Act 2006.

[2]                 The application is based on a costs judgment in related proceedings in which both the Body Corporate and Mr Cummins were involved. The background to the dispute which ultimately lead to the costs judgment is complex. It has been set out in numerous judgments of this Court and the Court of Appeal. I repeat the summary I

CUMMINS v BODY CORPORATE 172108 [2023] NZHC 3169 [10 November 2023]

provided in my judgment delivered in June 2023 (the footnotes are included as these reference the various judgments of this Court and the Court of Appeal):1

[3]                  The Body Corporate’s dispute with Mr Cummins (and others) began around 2010 and has continued unabated. From the start, the dispute has been the subject of intense litigation. The factual background is recorded in a number of judgments of this Court and the Court of Appeal.2

[4]                  For present purposes, it is only  necessary  to  recount  that  the  Body Corporate is the entity associated with a multi-storey apartment complex in Hobson Street in Auckland. Mr Cummins has been and remains connected  with  the  owners,  past  and  present,  of  Unit   12A.   Manchester Securities Ltd (in liquidation) is, and has been at all relevant times, the registered owner of Unit 12A, originally as the trustee of the Manchester Securities Trust, and more recently as a bare trustee (of the legal title) for its successors as such.

[5]                  At some point prior to 2010 the building was identified as having weathertightness issues — requiring the Body Corporate and the owners of units in the building to commit significant resources to remedial work. The central issue between the Body Corporate and Mr Cummins and his interests has been the proportions in which the Body Corporate and the other unit owners on the one hand, and Mr Cummins and his interests on the other hand, should contribute to the cost of remediation. That is a dramatic oversimplification of a complex dispute, but will serve for present purposes.

[6]                  At an earlier stage in this dispute, the Body Corporate commenced winding up proceedings against Manchester in an attempt to recover substantial outstanding body corporate levies. On 19 February 2020, this Court made an order placing Manchester in liquidation.3 Manchester appealed. On 29 April 2021, the Court of Appeal dismissed the appeal.4 In both this Court and the Court of Appeal Mr Cummins involved himself in argument. Consequently, the Body Corporate secured a costs award against him personally in the sum of $33,818.54.5

[7]                  It is that judgment debt which the Body Corporate is moving to enforce against Mr Cummins in this proceeding. On 13 September 2021, the Body Corporate served a bankruptcy notice. Mr Cummins applied pursuant to s 17(1)(d)(ii) of the Insolvency Act for an order setting aside the bankruptcy

1      Body Corporate 172108 v Cummins [2023] NZHC 1535 at [3]–[8].

2      See for example Manchester Securities Ltd v Body Corporate 172108 [2017] NZCA 527, (2017) 19 NZCPR 65; Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455; Manchester Securities Ltd v Body Corporate 172108 [2019] NZCA 408; Cummins v Body Corporate 172108 [2021] NZCA 145, [2021] 3 NZLR 17; Cummins  v  Body Corporate 172108  [2022]  NZCA  68;  and  Cummins  v  Body  Corporate  172108 [2022] NZCA 658.

3      Body Corporate 172108 v Manchester Securities Ltd [2020] NZHC 198 [Manchester liquidation judgment]. The orders made in the Manchester liquidation judgment were deferred for a period to allow Mr Cummins an opportunity to make arrangements to pay the debt concerned and avoid liquidation. Mr Cummins did not avail himself of that opportunity.

4      Cummins v Body Corporate 172108 [2021] NZCA 145 [Liquidation appeal judgment].

5      Body Corporate 172108 v Manchester Securities Ltd (in liq) [2021] NZHC 1542 at [2] and [11] [Costs judgment]. The quantum of costs was not noted in the costs judgment, but the amount is not in dispute between the parties in the present proceeding.

notice.   On  25  February  2022  this  Court  dismissed  that  application.6   Mr Cummins sought the recall of the judgment, asserting that it contained substantial factual and other errors. He also appealed. The judgment was reissued on 13 May 2022 to correct minor factual errors.7

[8]                  In a judgment dated 21 December 2022 the Court of Appeal dismissed Mr Cummins’  appeal.8  In  doing   so,  the   Court   of  Appeal   addressed Mr Cummins’ contention that the Body Corporate was a secured creditor of both Manchester and himself for the purposes of s 14 of the Insolvency Act 2006, as a result of its claim to be subrogated to Manchester’s lien over the Trust’s assets, concluding that the Body Corporate is not a secured creditor.

[3]    The Body Corporate commenced this proceeding in August 2021. Numerous factors have contributed to the delay in disposing of it to this point, including parallel proceedings in this Court and the Court of Appeal which both parties have acknowledged could have some impact on the outcome here, and various interlocutory applications along the way which have been the subject of unsuccessful appeals.

[4]    In June 2023 Mr Cummins applied for a halt of the proceeding pursuant to s 38 of the Insolvency Act. In my June 2023 judgment I dismissed that application for the reasons there stated. Now Mr Cummins applies for leave to appeal to the Court of Appeal.

[5]    There may or may not remain an argument as to whether or not Mr Cummins needs the leave he seeks.  I put  it  that  way  because  of  inconsistent  aspects  of  Mr Cummins’ submissions.

[6]Section 38 of the Insolvency Act says:

38 Court may halt application

(1)The court may at any time halt the creditor’s application for adjudication.

(2)The court may halt the application on the terms and conditions (if any), and for the period, that the court thinks appropriate.

[7]    A determination under s 38 may or may not be interlocutory in its nature. Section of the Senior Courts Act 2016 defines an interlocutory judgment. Essentially,

6      Body Corporate 172108 v Cummins [2022] NZHC 211[Setting-aside judgment].

7      Body Corporate 172108 v Cummins [2022] NZHC 1031 [Recall judgment].

8      Cummins v Body Corporate 172108 [2022] NZCA 658 [Setting-aside appeal].

an interlocutory judgment is one that does not finally dispose of a case.9 Thus, a judgment in which a halt is refused or where a temporary halt is ordered is interlocutory.

[8]As Mr Cummins points out, s 414(2) of the Insolvency Act says:

414     Rehearings and appeals

…

(2)An aggrieved person may appeal to the Court of Appeal from a decision of the court or a Judge under this Act.

[9]    In his written synopsis of submissions, Mr Cummins appeared to be contending that, because he was aggrieved by my June 2023 judgment, he has a right to appeal — that is to say that he does not require leave.   At the same point in his synopsis      Mr Cummins referred to s 56(3) of the Senior Courts Act 2016 which provides that a party wishing to appeal from an interlocutory judgment may only do so with leave from this Court or special leave from the Court of Appeal.

[10]   Mr Cummins contended that the two provisions conflicted with each other, the former conferring on him an unfettered right of appeal and the latter calling that right into question. He submitted — correctly as far as I am able to discern — that there are no definitive authorities addressing this point. He referred me to Heath J’s judgment in Balzat v Zhang.10 In that decision Heath J was, as Mr Cummins acknowledges, dealing with the relationship between s 414(1) and (2). Heath J concluded that s 414(1) conferred on the Court a discretion whether or not to review, rescind or vary an earlier decision of the Court or a judge under the Insolvency Act, whereas that the words of s 414(2) suggest that the aggrieved person has a right of appeal.

[11]   I do not see the difficulty. Heath J’s judgment is no more than tangentially relevant to this issue. It is true that in the passage referred to Heath J talks about the legislative intention being that an aggrieved person should be entitled to appeal “as of right”. But Heath J was not focussed on the distinction between interlocutory and

9      See the discussion in Waterhouse v Contractors Bonding Ltd [2013] NZCA 151.

10     Balzat v Zhang HC Auckland CIV-2008-404-6062, 22 September 2009at [61].

substantive judgments. In my view, having regard to the terms of s 56(3) of the Senior Courts Act, which post-dates the Insolvency Act, the right of appeal to which s 414(2) gives rise, and to which Heath J was referring in Balzat, is subject to the leave qualification as set out in that Act.

[12]   In short, whilst s 414(2) gives rise to what might loosely be referred to as a right of appeal from a judgment of the High Court  made  pursuant  to  the Insolvency Act, if the judgment in question is an interlocutory one, then that right is subject to the requirement for leave contained in s 56(3) of the Senior Courts Act.

[13]   In the end, I gained the impression that Mr Cummins was prepared to accept that, but, whether or not he was, that is the view that I take. The result, of course, is that Mr Cummins requires leave to appeal from my June 2023 judgment.

[14]   That brings me to the principles that apply to applications for leave, in respect of which there was no difference between Mr Cummins and Mr Orpin Dowell for the Body Corporate.

[15]   The leading authority is Greendrake v District Court of New Zealand in which the Court of Appeal said:11

[6] In Finewood Upholstery Ltd v Vaughan, to which Dunningham  J  referred to in the leave decision, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made. The following considerations were recognised as relevant on an application for leave to appeal:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the circumstances must warrant incurring further delay; and

11     Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].

(e)the ultimate question is whether the interests of justice are served by granting leave.

[16]   As Mallon J recently said in Vance v Vey Group Ltd (in receivership and in liquidation):12

[5] Whether an appeal will be dispositive of the case will be relevant to whether the alleged error is “of sufficient importance to the applicant” and whether the “interests of justice are served by granting leave”. It does not displace other considerations such as whether “the circumstances must warrant incurring further delay”. I accept the submission for the liquidators that relevant to this is a liquidator’s duty to act in a reasonable and efficient manner when distributing funds to creditors. That duty is frustrated if an unmeritorious appeal of a liquidator’s decision on whether to admit or reject a claim against a company in liquidation is permitted to proceed.

[17]   Mr Cummins covered most of those points in his submission relating to the principles involved, and Mr Orpin Dowell for the Body Corporate did not take issue with Mr Cummins’ summary.

[18]   I would add only this: the nature of the determination that the Court is obliged to make in applications of this sort lends itself to a brief judgment limited to identifying and addressing the key points, in all but the most complex cases.

[19]   Mr Cummins’ argument, which was set out in full in his synopsis of submissions, and pruned to some extent in an outline he provided at the hearing, covered a considerable amount of ground.

[20]   His argument did not focus to any extent on the high threshold involved, though he accepted of course that that is the starting point.

[21]   Mr Cummins’ principal argument was that he has a cross-claim against the Body Corporate (as that term is used in s 17(7) of the Insolvency Act) which is arguable or triable for an amount greater than the amount of the Body Corporate’s judgment against him.

12     Vance v Vey Group Ltd (in receivership and in liquidation) [2022] NZHC 1861 at [5].

[22]   The claim upon which Mr Cummins relies is a claim that was formerly asserted by Manchester Securities Ltd (a company then controlled by Mr Cummins) which was placed in liquidation in February 2020.

[23]   Mr Cummins has, in the context of this particular component of the litigation concerning the Hobson Street property, claimed the right to stand in the shoes of the company in liquidation and pursue that claim. The legal bases upon which he has asserted this right need not trouble the Court here, because it is no part of Mr Orpin Dowell’s argument to contend that Mr Cummins does not have at least an arguable right to pursue the claims in question.

[24]   Nor is it advanced on the Body Corporate’s behalf that the claims themselves are not arguable.

[25]   These claims are the subject of an arbitral proceeding (in the name of Manchester Securities, as I understand it) which is currently the subject of a stay.

[26]   The position then is that there are claims which were formerly advanced by Manchester Securities and are now being advanced by Mr Cummins against the Body Corporate. The claims are based on a particular “take” on the rights and obligations of the parties pursuant to a scheme of arrangement for remedial work on the Hobson Street building. Essentially, Mr Cummins’ case is that he — standing in the position of the owner of apartment 12A — is entitled to pursue claims under that scheme against the Body Corporate on which he puts a value of some millions of dollars.

[27]   On that basis, Mr Cummins’ argues, the Court was, pursuant to s 38 of the Insolvency Act, obliged to stay this proceeding because he has a triable cross-claim which exceeds the amount of the judgment debt.

[28]   There are other aspects to, or variations of, that core argument. I propose to address the core argument and then return to those to the extent necessary.

[29]   In advancing this argument Mr Cummins cites and places considerable reliance on Re Bayoil SA,13 where the English Court of Appeal said that where a judgment debtor is able to establish an arguable set-off, counterclaim or cross-demand which exceeds the value of the judgment debt, the Court will, in the absence of special circumstances, exercise its discretion by dismissing or staying bankruptcy proceedings founded on that judgment debt.

[30]   Mr Cummins’ argument is that having established an arguable cross-claim as already described, it was only open to the Court to refuse his application for a halt of the proceeding (presumably pending the resolution of that cross-claim) if there are “special circumstances”.

[31]   Then, Mr Cummins submits that I was wrong to conclude in my June 2023 judgment that there are special circumstances in this case and refuse to halt the proceeding under s 38 — particularly, he says that I failed to explain in my judgment what those special circumstances were.

[32]   Additionally, Mr Cummins contends that there is a dearth of authority in relation to exactly what constitutes special circumstances, and that there is a genuine public interest in clarifying this at appellate level.

[33]   It is correct that in my judgment at para [60] I concluded that special circumstances existed. Between paragraphs [37]–[60] I tried to explain why I had reached that conclusion. In broad summary:

(a)the background to this litigation in which Manchester Securities and Mr Cummins have taken every conceivable point, many of which, in my assessment, have been without substantial merit;

(b)the fact that, even if Mr Cummins can claim standing to pursue the claims in question, they are the subject of arbitral proceedings which were commenced years ago, which are stayed and there is no immediate prospect of them being resurrected;

13     Re Bayoil SA [1999] 1 WLR 147 (CA).

(c)the fact that in this proceeding the Court is dealing with a judgment debt for a sum certain, which is payable immediately and that the claim that Mr Cummins relies on is a claim for an unliquidated amount in arbitral proceedings which may or may not be successful;

(d)the  fact  that  the  evidence   demonstrates   conclusively   (despite  Mr Cummins’ rather somewhat vehement attempt to persuade me to the contrary) that he is insolvent in the sense that he is unable to meet his debts as they fall due;

(e)the fact that while this dispute is dragged out the necessary remedial work  remains  incomplete  to  the  serious  disadvantage  of  the  Body Corporate and all members.

[34]   Those considerations led me to conclude, without great difficulty, that special circumstances exist in this case.

[35]   And, those same considerations lead me to the view that the prospects of    Mr Cummins being successful in any appeal are remote.

[36]   Before moving to the next consideration, I return — as I indicated I would — to the alternative claims on which Mr Cummins seeks to rely. These are his quantum meruit claim and his claim pursuant to the Land Transfer Act 2017. It is unnecessary to deal with either of these claims at any length. I dealt with them in paras [79]–[86] and [87]–[102], respectively of my June 2023 judgment. In my view, neither claim has any merit, and I do not accept that they take matters any further.

[37]   That brings me to the question of whether there is any general or public importance connected with the issue which Mr Cummins says he wishes to argue on appeal, and the importance of the matter from Mr Cummins’ perspective. I do not accept Mr Cummins’ submission that there is a need for the Court of Appeal to provide guidance as to what constitutes special circumstances.

[38]   The Bayoil decision was issued in 1998, and I am unaware of any agitation for clarification on the point from the courts or commentators.

[39]   Moreover, terms such as “special circumstances” defy exhaustive definition, and it seems doubtful that the Court of Appeal would regard it appropriate to attempt any comprehensive analysis. The circumstances of individual judgment debtors are infinitely diverse, and any attempt at a comprehensive definition would ultimately fail.

[40]   I accept that this matter is one of great significance for Mr Cummins. If the proceeding is not halted, he faces the possibility of bankruptcy. That, however, is no more than a possibility. If there is no appeal then the matter will proceed to a hearing and it remains open to Mr Cummins to defend the Body Corporate’s application. In the end, I do not regard this as a circumstance which outweighs the lack, in my view, of any general precedential value in this matter being reconsidered in the Court of Appeal.

[41]   The consideration relating to delay answers itself in this case. The delay in the disposal of aspects of this matter has been extraordinary, and, as already said, largely as a result of the actions of Manchester Securities and Mr Cummins. In my view, the circumstances do not justify any further delay.

[42]   As the cases consistently emphasise, the most important consideration in the end is the interests of justice. That question of course must be considered from the perspectives of both the Body Corporate and its membership as well as Mr Cummins, not to mention the public interest. As should be apparent from the analysis above, the view I have come to is  that it is not in the interests of justice to grant leave to       Mr Cummins to appeal.

[43]Mr Cummins’ application is dismissed.

[44]   I am aware that costs are in issue. Both Mr Orpin-Dowell for the judgment creditor and Mr Cummins have filed and served memoranda as to costs. I will deal

with costs on the papers.

Associate Judge Johnston

Solicitors:

Grove Darlow & Partners, Auckland for the Judgment Creditor