DeMarco v Anderson

[2021] NZCA 476

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA438/2021
 [2021] NZCA 476

BETWEEN	EUGENE JOHN DEMARCO Applicant
AND	NORMAN HUGH ANDERSON AND REBECCA ALICE CARRASCO First Respondents OFFICIAL ASSIGNEE Second Respondent

Court:	Brown and Collins JJ
Counsel:	Applicant in person E S K Dalzell for First Respondents G A D Neil and S P Farnell for Official Assignee
Judgment: (On the papers)	21 September 2021 at 10.00 am

JUDGMENT OF THE COURT

AThe application to suspend adjudication of Mr DeMarco’s bankruptcy is declined.

BThe applicant must pay the first respondents costs for a standard application on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Collins J)

Introduction

1. Mr DeMarco was adjudged bankrupt on 14 July 2021.[1]  That adjudication occurred in the context of:

   (a)Mr DeMarco having been ordered to pay damages totalling $170,436 and costs totalling $153,005.07 to Mr Anderson and Ms Carrasco.[2] We explain the litigation giving rise to those damages and costs orders at [7].

   (b)The High Court having declined Mr DeMarco’s application to stay the judgment giving rise to the damages and costs orders.[3]

   (c)The High Court having declined Mr DeMarco’s application to stay the application to bankrupt him.[4]

   (d)Mr DeMarco having filed a notice of appeal against the first damages award.  That appeal was deemed abandoned as at 10 June 2021 because of Mr DeMarco’s failure to file his case on appeal and apply for a fixture.

   [1]Anderson v DeMarco [2021] NZHC 1757 (Bankruptcy judgment).

   [2]Anderson v DeMarco [2020] NZHC 1349 (First costs judgment); Anderson v DeMarco [2020] NZHC 2979, (2020) 21 NZCPR 758 (First damages judgment); and Anderson v DeMarco [2020] NZHC 3490 (Second damages and costs judgment).

   [3]DeMarco v Anderson [2021] NZHC 544.

   [4]Bankruptcy judgment, above n 1, at [32].

2. Mr DeMarco has been involved in other litigation and prosecutions, including the following proceedings:

   (a)On 13 September 2019, he was convicted on four charges of theft by a person in a special relationship and two charges of obtaining by deception.[5]  Those convictions were not related to the proceedings brought by Mr Anderson and Ms Carrasco.

   (b)The placing into liquidation of two of Mr DeMarco’s companies, namely the Old Stick and Rubber Co Ltd and Dairy Air Ltd.

   (c)In another proceeding, it is alleged Mr DeMarco misappropriated $2.1 million from The Vintage Aviatior Ltd and misapplied $720,000 to repay a debt to The Film Property Trust.

   [5]R v DeMarco [2019] NZHC 3209.

3. Mr DeMarco has applied to this Court under s 414(2) of the Insolvency Act 2006 (the Act) to set aside the adjudication of bankruptcy.  He has also applied under s 416(1) of the Act to have the adjudication suspended pending the hearing of the appeal.  That latter application is the subject of this judgment.

4. Mr Anderson, Ms Carrasco and the Official Assignee oppose the application to suspend the adjudication of Mr DeMarco’s bankruptcy.

5. The application to suspend bankruptcy was initially scheduled to be determined by this Court during the week of 6 September 2021.  Mr DeMarco sought an adjournment.  That application was declined.  Mr DeMarco was, however, provided the opportunity to file by 9 September 2021 any submissions he wished to make in response to those filed by the Official Assignee.  The parties were informed the application to suspend bankruptcy would be determined in the week of 13 September 2021.

6. Mr DeMarco has filed submissions in response to those filed by the Official Assignee, Mr Anderson and Ms Carrasco.  He has also applied for orders requiring the Official Assignee to prove, amongst other things, he is authorised to administer Mr DeMarco’s estate and has the requisite standing.

Background

1. The litigation that led to the damages and costs orders we have referred to at [1(a)] arose from a contract in which Mr DeMarco agreed to sell a property to Mr Anderson and Ms Carrasco.  They paid a deposit of $120,000 but cancelled the contract prior to settlement on the ground that Mr DeMarco had misrepresented the state of the property and had failed to disclose the extent of the property’s lack of weathertightness.  In November 2020, Cooke J delivered judgment in favour of Mr Anderson and Ms Carrasco and made the damages and costs orders we have referred to at [1(a)].[6]

Grounds of appeal

[6]First damages judgment, above n 2.

1. Mr DeMarco’s grounds of appeal against the decision adjudging him bankrupt are that the Associate Judge who adjudicated Mr DeMarco bankrupt:

   (a)erred in fact and law;

   (b)wrongly concluded Mr DeMarco is unable to satisfy his debts;

   (c)erred in assessing the low likelihood of Mr DeMarco succeeding in unrelated proceedings;

   (d)failed to have regard to Mr Anderson and Ms Carrasco’s conduct when, according to Mr DeMarco, they obstructed his ability to value his assets and take other steps to address his creditors; and

   (e)failed to ensure his right to a fair hearing.

2. Mr DeMarco argues that the adjudication of bankruptcy should be suspended because:

   (a)he is conducting a bona fide appeal;

   (b)Mr Anderson and Ms Carrasco have not advanced any reason to demonstrate they will be affected adversely if the bankruptcy is suspended;

   (c)Mr Anderson and Ms Carrasco will use the enforcement procedures to prevent him from pursuing the appeal; and

   (d)the case involves persons of significant public importance, including Sir Peter Jackson.

Principles governing suspension of bankruptcy

1. The factors governing an application to suspend bankruptcy are the same as those that apply to a stay pending an appeal.[7]  The Court must weigh the rights of the successful litigant in the Court below and ensure that an applicant’s rights to justice are not unfairly frustrated.  Relevant factors include:[8]

   [7]Bioletti v Commissioner of Inland Revenue [2013] NZCA 465 at [3].

   [8]Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].

   (a)whether the appeal may be rendered nugatory if suspension is not granted;

   (b)the bona fides of the appeal;

   (c)whether the successful party will be injuriously affected by a stay;

   (d)the effect on third parties;

   (e)the novelty and importance of questions involved;

   (f)the public interest in the proceeding;

   (g)the overall balance of convenience; and

   (h)the apparent strength of the appeal.

Analysis

The appeal will not be rendered nugatory

1. Mr DeMarco’s appeal will not be rendered nugatory if his application to suspend the adjudication is declined.  He is fully able to pursue his appeal under s 414 of the Act regardless of whether the adjudication is suspended.

Bona fides and strength of appeal

1. Mr DeMarco allowed one appeal to lapse in this Court.  That appeal concerned one of the judgments that laid the foundation to him being adjudged bankrupt.  This is a factor that undermines Mr DeMarco’s arguments concerning the strength and bona fides of his appeal.

Interests of unsecured creditors

1. The duty of the Official Assignee is to realise the assets and distribute the net proceeds of Mr DeMarco’s bankrupt estate.  The Official Assignee has already undertaken significant work investigating and administering Mr DeMarco’s bankrupt estate.  That work has involved:

   (a)the Official Assignee appearing in two High Court proceedings concerning vintage aircraft owned by Mr DeMarco or his associated companies;

   (b)an evaluation of Mr DeMarco’s abandoned appeal in this Court;

   (c)an assessment of other proceedings and appeals with which Mr DeMarco is involved; and

   (d)the placing of two of Mr DeMarco’s companies into liquidation.

2. In Lindsay v Vaucluse Holdings Ltd,[9] this Court recognised that it will often be quite contrary to the interests of creditors to allow an adjudication of bankruptcy to be suspended pending the hearing of the appeal.  That observation is entirely apposite in the present case.  Mr Anderson and Ms Carrasco and other unsecured creditors are entitled to have the Official Assignee complete the administration of Mr DeMarco’s bankrupt estate as expeditiously as is possible.

Public interest

[9]Lindsay v Vaucluse Holdings Ltd CA272/99, 13 December 1999.

1. We agree with the Official Assignee that suspending adjudication is likely to be highly prejudicial to the public interest.

2. The Official Assignee has identified a number of assets and property that need to be investigated and if necessary secured.  Those properties and assets include real estate in New York and Florida, a Ferrari motor car in New York and a plane in New Zealand, the ownership of which may be in the process of being transferred to a company in the United Kingdom.

3. It is in the public interest that the restrictions attached to the adjudication remain in full force so as to enable the Official Assignee to discharge his duties and mitigate against any harm being caused to the business community and the broader public through the Official Assignee being hampered in the discharge of his responsibilities.

Balance of convenience

1. The balance of convenience also weighs very heavily in favour of declining the application to suspend the adjudication.  We are satisfied the Official Assignee should be permitted to continue with his investigations and to administer Mr DeMarco’s bankrupt estate as quickly as is possible.

Result

1. The application to suspend adjudication of Mr DeMarco’s bankruptcy is declined.

2. The applicant must pay the first respondents costs for a standard application on a band A basis and usual disbursements.

Solicitors:
Parker & Associates, Wellington for First Respondents
Meredith Connell, Auckland for Official Assignee