Dorbu v Barfoot and Thompson

[2010] NZCA 216

IN THE COURT OF APPEAL OF NEW ZEALAND

CA164/2010
[2010] NZCA 216

BETWEENJOHN EVANS DORBU

Applicant

ANDBARFOOT AND THOMPSON LTD

Respondent

Hearing:18 May 2010

Court:Arnold, Ellen France and Baragwanath JJ

Counsel:Applicant in person

T Rea for Respondent

Judgment:28 May 2010 at 2.30pm

JUDGMENT OF THE COURT

AThe application for a stay of execution and stay of proceedings is declined.

BThe applicant must pay the respondent costs on the same footing as for a standard application for leave to appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Baragwanath J)

[1]        Mr Dorbu applies under Rule 12 of the Court of Appeal (Civil) Rules 2005 for two orders for stay.  They concern:

(a)the execution of an order for costs and security made by Associate Judge Abbott in the High Court as a condition of adjournment of a bankruptcy application; and

(b)the further pursuit of the bankruptcy proceedings in that Court pending the hearing and determination of:

(i)his appeal to this Court against the costs and security order;

(ii)an application to the District Court to set aside a default judgment on which the security order and part of the costs order are based. 

[2]        The grounds notified in the notice of appeal were:

(a)the pending application to the District Court to set aside the default judgment and the appeal to this Court have merit and are likely to succeed;

(b)the appeal would be rendered nugatory unless stays are ordered;

(c)the effect of the High Court’s order was punitive.

[3]        The applicant’s written submissions added:

(d)the Judge lacked jurisdiction to impose as a condition of adjournment that Mr Dorbu pay into Court the amount of the claim;

(e)the sanction imposed by the Judge was disproportionate to the circumstances;

(f)Mr Dorbu did not receive a proper hearing and his right to justice under s 27(1) of the New Zealand Bill of Rights Act 1990 was infringed.

[4]        In his oral argument Mr Dorbu sought leave to add:

(g)the creditor’s application is invalid because it was issued before the time for compliance with the bankruptcy notice had expired;

(h)the order of the Associate Judge contravened s 42 of the Insolvency Act 2006.

Context of application

[5]        The judgment creditor (Barfoots) is a well-known Auckland land agent.  Mr Dorbu appointed it sole agent for the sale of four properties.  During the term of the agency contract, which was to expire on 31 May 2008, Barfoots asked Mr Dorbu to provide for funds to pay for marketing.  Mr Dorbu declined to do so.  On 7 May 2008 and therefore before the agreed expiry date Mr Dorbu contracted to sell one of the properties for $200,000 and on 22 August he settled the sale.  When Barfoots learned of the sale it issued a proceeding in the Disputes Tribunal claiming commission of $7,500.  Mr Dorbu responded with a successful application to move the proceeding into the District Court and to make a cross-claim claim against Barfoots for damages. 

[6]        Mr Dorbu’s statement of claim pleads that Barfoots’ representative had asserted it would not perform the contract to market the properties unless paid $13,000 more or less for the cost of marketing.  Mr Dorbu declined to do so and suggested that Barfoots expose the properties to other agents to increase the prospects of sale.  Barfoots declined to do so and took no or no adequate steps to market the properties and Mr Dorbu lost the opportunity for sale before the market fell.  Mr Dorbu’s statement of claim alleged:

(a)breach of contract by Barfoots, by:

(i)failure to undertake reasonably competent marketing activities, including bearing the cost of marketing;

(ii)asserting that it would not sell the properties unless Mr Dorbu paid some $4,500 costs of marketing each property;

(iii)engaging in economic duress by refusing to market unless Mr Dorbu made such payments; and

(iv)Barfoots’ repudiation of the agreement, which Mr Dorbu accepted by cancellation of the sole agency.

(b)Negligence in:

(i)failing to exercise reasonable care to market the properties; and

(ii)failing to keep Mr Dorbu informed about market conditions.

The statement of claim sought damages of $200,000.

[7]        Having commenced his claim, on 1 February 2009 Mr Dorbu left New Zealand.  On 23 February 2009 Barfoots filed a statement of defence and counterclaim for its commission.  No statement of defence having been filed by Mr Dorbu, on 31 March 2009 Barfoots sealed judgment against Mr Dorbu for $9,868 including costs.  On 29 June 2009, following non-compliance with an order for discovery and production of the agreement for sale of the property, it obtained judgment from Judge Hubble striking out Mr Dorbu’s claim.  The Judge ordered payment by Mr Dorbu of further costs of $3,904, bringing the total costs award to $13,772.

[8]        Mr Dorbu submitted that the following emails were sent without prejudice.  On 1 October 2009 Mr Dorbu emailed Barfoots’ solicitors, Glaister Ennor, stating:

I have just returned from overseas.  I called your office this morning but Ms Caroline Eric informed me that you were in a meeting.

The purpose of my call was to talk about paying your client, Barfoot & Thompson’s judgment debt.  Ms Eric advised me she would send me a trust account detail today by email into which I can deposit funds to pay off the debt.  Please confirm this as I intend to get on to it immediately.

...

The next day Mr Dorbu emailed Glaister Ennor stating:

Could I pay this amount by regular monthly instalment[s]?.. Please advise the minimum monthly amount payable.  I will need some time to pay this off.

Asked to advise his proposals so instructions could be taken he replied:

I will pay not less than $500 per month, but I intend to pay more than that when circumstances permit, so that I can pay all of it off as soon as possible.

The offer of payment by instalments was declined.  Barfoots’ solicitors invited submission of a verified statement of assets and liabilities in form 52 of the District Courts Rules.  None was provided. 

[9]        Bankruptcy proceedings were commenced and it was necessary for Barfoots to obtain an order for substituted service of the bankruptcy notice dated 24 November 2009 which demanded payment of the amount of the costs judgments.  It required Mr Dorbu within 10 days to make payment or satisfy the High Court that he had a counterclaim, setoff or cross demand of no less than the judgment debt that could not be brought forward in the proceeding in which the costs order was made.  Deemed service occurred on 27 November.  Mr Dorbu made no response.  A further order for substituted service was required in respect of the creditor’s application of 14 January 2010, supporting affidavit and summons to debtor.  Service was effected on 16 February 2010.  Mr Dorbu emailed Glaister Ennor the same day requesting copy of the order.

[10]       The summons stated plainly:

1  You are summoned to attend before the High Court at Auckland at 10.45 am/pm on Tuesday the 9^th day of March 2010 (the hearing date)

(italics represent handwriting)

It recounted the events to date, including:

(a)the judgments for $9,868 and $3,904, totalling $13,772;

(b)the deemed service of the bankruptcy notice on 17 December 2009;

(c)failure within 10 working days after service of the notice, namely before 11 January 2010, to comply with its requirements or to satisfy the Court he had a counterclaim, setoff or cross demand equalling the amount of the judgment debt which he could not put forward in the proceedings in which the judgment was obtained;

(d)the application to adjudicate Mr Dorbu bankrupt and supporting affidavit and that if by the hearing date he had not paid the $13,772 the applicant was entitled to ask the Court to adjudge him bankrupt.  

It concluded that if he opposed the making of an order of adjudication he must by 1pm on the last working day before the hearing date file and serve notice of opposition and supporting affidavit.

[11]       It is reasonable to infer that as a practising barrister Mr Dorbu understood the document.  But he made no response to it prior to the hearing.

[12]       Mr Dorbu attempted to make something of the following emails sent by Glaister Ennor to Mr Dorbu on 15 February 2010 at 11.03am and 11.06am respectively:

Mr Dorbu

We are now filing an application for substituted service of the bankruptcy proceeding on you.  The orders sought include that substituted service be effected by advertising the proceeding in the NZ Herald.

We have become aware of other bankruptcy proceedings that you are presently facing with a scheduled hearing date on 20 March, a few days after the first call date of this proceeding on 9 March.  In the circumstances, no purpose will be served by requiring our client to proceed with the formalities of obtaining substituted service orders on you as it would have the option either of effecting service if you appear for the proceeding on 20 March, or else substituting in those proceedings as petitioning creditor in the event that claim is settled.

Mr Dorbu,

There was an error in my earlier message regarding the hearing date of the application in the other proceeding which I understand is 16 March at 10.45am, not 20 March as recorded incorrectly below.  Nevertheless, the invitation to accept service voluntarily remains.

[13]       But Mr Dorbu made no response to the invitation to facilitate personal service.  So he had no reason whatever to assume that the case would not proceed at the time and on the date stated in the formal summons.  It informed him clearly that notice of any defence must be given in due form and time prior to the hearing.

[14]       He chose instead to do nothing until he arrived at court at the time of the hearing and sought an adjournment.

Discussion

[15]       Associate Judge Abbott was faced with an opposed application by a legal practitioner who:

(a)had taken no steps either to defend Barfoots’ claim in the District Court or to apply to that Court to set aside the default judgment in its favour;

(b)had had his own claim struck out with costs for failure to comply with court orders;

(c)had required the petitioning creditor to obtain two orders for substituted service in the bankruptcy proceeding;

(d)had failed to file any notice and supporting affidavit setting out grounds for resisting bankruptcy; and

(e)was also the subject of a further pending bankruptcy application. 

[16]       The Judge made the following note of Mr Dorbu’s submission, that :

he was advised by solicitor for creditor ... that hearing was 16 March.  1^st call. Seeks adjournment to allow opportunity to apply to set aside judgment entered after his defence and counterclaim was struck out.  Contends that he has been in negotiations with solicitor in intervening period. 

[17] But the Judge was not provided with the correspondence from Barfoot’s solicitors to Mr Dorbu, reproduced at [12] above. When on 1 April 2010 he gave judgment on an application to recall the 9 March decision he concluded that a submission by Mr Dorbu that he had been misled by the correspondence lacked credibility. We agree. Had the Associate Judge had that material before him on 9 March he would have seen at once that the “negotiations” related solely to terms of payment of an undisputed debt and that they had terminated five months earlier.

[18]       We turn to appropriateness of granting a stay.

[19]       Hammond J in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd[1] stated a non-exclusive list of considerations a court should take into account when deciding whether to grant a stay:

(i)whether the appeal may be rendered nugatory by the lack of a stay.;

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

(iii)the bona fides of the applicant as to the prosecution of the appeal;

(iv)the effect on third parties;

(v)the novelty and importance of questions involved;

(vi)the public interest in the proceeding;

(vii)the overall balance of convenience and the status quo.

[1]Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9], approved by the Court of Appeal in New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 565 at [11].

[20]       If Mr Dorbu lacks means the appeal may be rendered nugatory.  But while a material consideration that does not of itself entitle him to a stay: Cousins v Heslop.[2]  The effect on Barfoots of granting a stay is likely to be injurious: it will have to wait yet longer to collect the debt from a judgment debtor who has already forced the creditor to jump a series of interlocutory hurdles.  This also suggests that the bona fides of Mr Dorbu’s application is questionable.  Further, the stays of execution and of the bankruptcy proceedings are sought in the widest possible terms, and the questions involved are not a matter of novelty, importance or public interest. 

[2]      Cousins v Heslop [2007] NZCA 377 at [10].

[21] The stay was sought on the footing that there was merit in Mr Dorbu’s grounds of challenge to the the judgment and costs orders made in the District Court. We see none, nor did Mr Dorbu attempt to persuade us otherwise in oral argument. Grounds (a) and (b) are dealt with at [20] above. We deal briefly with the remainder below.

Ground (d): No jurisdiction to order security

[22]       Associate Judge Abbott was exercising the inherent jurisdiction of the High Court, recognised by s 16 of the Judicature Act 1908, whether to grant a dispensation from proceeding with a fixture of which due notice had been given.  An application for adjournment may be declined or granted with or without conditions.  In the case of a bankruptcy proceeding the Court may order security to recognise the risk that delay will prejudice a judgment creditor. 

Ground (c): Effect of order punitive/ground (e): sanction imposed disproportionate

[23]       The proper discharge of the bankruptcy jurisdiction includes the practical and efficient disposal of meritless pleas for further time.  Had the Judge received from Mr Dorbu the candid account of events, to be expected of a practising barrister, despite the relatively small sum at stake, there must have been distinct risk of an immediate order of adjudication.  Mr Dorbu had acknowledged his liability.  He has not, even in this Court, produced the contract with Barfoots and any reasoned submission that on its true construction Barfoots had assumed the obligation of funding the marketing of his properties.  The consequences of an order for security and costs were substantially less than those of immediate adjudication.  It was well open to the Judge to impose, in exercise of the Court’s inherent power to grant adjournment, the conditions he selected.

Ground (f): No proper hearing

[24]       The Judge dealt expeditiously with an oral application for adjournment made without notice and following failure to comply with the obligation to file notice of opposition and supporting affidavit in advance.  There is nothing in the point.

Ground (g): The creditor’s application was issued prematurely

[25]       To commit an act of bankruptcy, under s 17 of the Insolvency Act a debtor must have failed within 10 working days after service to comply with a bankruptcy notice.[3]  Mr Dorbu submitted that the creditor’s application of 14 January 2010 was premature.  He cited the definition of “working day” in rule 1.3(1) of the High Court Rules which excludes the period commencing with 25 December and ending with 15 January and submitted that from 17 December 2009 to 14 January 2010 included only 5 working days. 

[3]      Insolvency Act 2006, s 17.

[26]       Barfoots submitted, however, that the correct definition of “working day” was that in s 29 of the Interpretation Act 1999, which applies to “enactments” such as the Insolvency Act.  Section 29 gives the definition:

Working day means a day of the week other than—

(a) A Saturday, a Sunday, Waitangi Day, Good Friday, Easter Monday, Anzac Day, the Sovereign's Birthday, and Labour Day; and

(b) A day in the period commencing with 25 December in a year and ending with 2 January in the following year; and

(c) If 1 January falls on a Friday, the following Monday; and

(d) If 1 January falls on a Saturday or a Sunday, the following Monday and Tuesday:

[27]       That submission is correct.  The tenth working day following service of the bankruptcy notice was 11 January 2010.  The application of 14 January was therefore not premature.

Ground (h): The Judge’s order contravened s 42 of the Insolvency Act

[28]       The submission was made on the basis that s 42 applied.  But it concerns cases where an appeal against a judgment is pending.  No appeal had been filed.  Section 42 had no possible relevance.

[29]       Overall, the balance of convenience is overwhelmingly in Barfoots’ favour. 

Result

[30]       All grounds advanced having failed the application for a stay of execution and stay of proceedings is declined.  Mr Dorbu must pay Barfoots costs on the same footing as for a standard application for leave to appeal on a band A basis and usual disbursements.

Solicitors:

Tua Mose Saseve, Auckland for Applicant

Glaister Ennor, Auckland for Respondent