Ellis v Johnson
[2016] NZHC 2271
•26 September 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-002389 [2016] NZHC 2271
BETWEEN TAMARIE VELVET ELLIS
Judgment Creditor
AND
RICHARD OWEN JOHNSON Judgment Debtor
Hearing: On the papers Judgment:
26 September 2016
JUDGMENT OF COURTNEY J
This judgment was delivered by Justice Courtney on 26 September 2016 at 1.15 pm
pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date………………………..
ELLIS v JOHNSON [2016] NZHC 2271 [26 September 2016]
Introduction
[1] The applicant, Tamarie Ellis, obtained judgment against the respondent, Richard Johnson, on 15 July 2016 for $322,324.53.1 The judgment was given in the context of relationship property proceedings.
[2] Mr Johnson has not paid the judgment debt, despite the sealed order being served on him (by delivery to his solicitor’s office) together with a letter of demand dated 25 August 2016 from Ms Ellis’ barrister. Nor has he made any arrangements to pay the debt. Mr Johnson now lives in the US but is temporarily in New Zealand. He has indicated in an email to Ms Ellis that he intends leaving New Zealand on 27
September 2016 (tomorrow).
[3] Ms Ellis has applied for an order adjudicating Mr Johnson bankrupt on the ground that, in preparing to leave New Zealand, he is committing an act of bankruptcy.2 On Friday, 23 September 2016 she applied, without notice, under r
17.88 for an order that Mr Johnson be arrested on the ground that his absence from
New Zealand will materially affect the prosecution of the bankruptcy proceedings.
[4] The application did not seem to me to fall within r 17.88. I held telephone conferences with Ms Ellis’ counsel, Mr Knight, on 23 September and again this morning. For the reasons that follow the application is dismissed.
Application
[5] Under r 17.88 a plaintiff may apply without notice for an order to arrest and imprison a defendant under s 55 of the Judicature Act 1908. Section 55 is limited in scope and directed towards the period before judgment is entered. It provides:
55Power under certain circumstances to arrest defendant about to quit New Zealand
(1) A person shall not be arrested upon mesne process in any civil proceedings in the High Court.
1 Johnson v Johnson [2016] NZHC 890, [2016] NZLR 227.
2 Insolvency Act 2006, s 20.
(2) Where in any civil proceedings in the High Court in which, if brought before the first day of October, 1874 (being the date of the coming into operation of the Imprisonment for Debt Abolition Act
1874), the defendant would have been liable to arrest, the plaintiff proves at any time before final judgment, by evidence on oath to the
satisfaction of a Judge of the Court, that the plaintiff has good cause
of action against the defendant to the amount of $100 or upwards, and that there is probable cause for believing that the defendant is
about to quit New Zealand unless he is apprehended, and that the
absence of the defendant from New Zealand will materially prejudice the plaintiff in the prosecution of those proceedings, such Judge may, in the prescribed manner, order such defendant to be arrested and imprisoned for a period not exceeding 6 months, unless and until he has sooner given the prescribed security, not exceeding the amount claimed in those proceedings, that he will not go out of New Zealand without the leave of the High Court.
(3) Where the civil proceedings are for a penalty, or sum in the nature of a penalty, other than a penalty in respect of any contract, it shall not be necessary to prove that the absence of the defendant from New Zealand will materially prejudice the plaintiff in the prosecution of those proceedings; and the security given (instead of being that the defendant will not go out of New Zealand) shall be to the effect that any sum recovered against the defendant in those proceedings will be paid or that the defendant shall be rendered to prison.
(4) All the powers conferred by this section upon a Judge may be exercised by the Registrar of the Court:
Provided that such powers shall be exercised by the said Registrar only in the absence of the Judge from the place where the office of the Court is situate at which the application for such order as aforesaid is made.
[6] The purpose of s 55 is to ensure that the plaintiff is able to prove and obtain judgment for a debt in circumstances where he or she requires the presence of the alleged debtor to do so. The authorities and the commentary are all clear and consistent that s 55 has no application once judgment has been obtained. It is not intended as a tool of enforcement.
[7] In Kelly v Schofield, Chilwell J approved the following as a correct summary of the principles (taken from the commentary on the McGechan on Procedure then current):3
(a) The Court’s jurisdiction under s 55 is discretionary and has been
exercised sparingly;
3 Kelly v Schofield HC Auckland CP1327/86, 10 December 1986.
(b) The section is concerned with the arrest of a defendant who is absconding before judgment with the aim of frustrating the plaintiff’s proceeding and the obtaining of judgment;
(c) The Court will order the arrest of the defendant only where the evidence of the defendant is materially necessary for the plaintiff to prove its case. The application should, therefore, be supported by affidavits which demonstrate why the defendant’s evidence is necessary;
(d) The section is not intended to give any right to a plaintiff to arrest the defendant merely because the absence of the defendant would render it difficult or impossible for the plaintiff to obtain the fruits of its judgment if the defendant left New Zealand;
(e) The entry of judgment against the defendant operates as a discharge or annulment of an order for arrest previously obtained against it under this section (citing Felton v Callis [1968] 3 All ER 673; Lawson, Swain & Walker Ltd v Montefiore [1919] NZLR 666; Hunter v Sullivan (1911) 14 GLR 293).
[8] More recently, Heath J considered the ambit of s 55 in Robinson v Whangarei Heads Enterprises Ltd.4 He observed that the original purpose of s 55 was to substitute a different process for the previous power to imprison a debtor for non- payment of a debt and to issue a writ of arrest on mesne process.5 Heath J also went on to cite the following passage from Professor Sutton’s text on creditor’s remedies:6
Statutory conditions must be strictly complied with. For example, s 55 states that there must be a cause of action for the recovery of money, so that an action designed to compel the defendant to pay money to a third party is not within in. No arrest can therefore be ordered under the section. The third condition is especially important, since it shows that the purpose of the section is not to assist a creditor in recovering a debt, but to assist him in proving his claim. In many cases he will be able to establish his case without the assistance of the defendant’s evidence, and the section then has no application. It is therefore necessary, in applications under the section, to demonstrate the way in which the attendance of the defendant is important to the plaintiff’s case. It is not enough generally to state that this is so and the Judge will examine such assertions very carefully. Moreover any order made under the section ceases to operate as soon as the plaintiff obtains judgment since the need for such an order has ended and any security the defendant has given for his attendance is immediately refundable to him.
4 Robinson v Whangarei Heads Enterprises Ltd [2013] NZHC 2247.
5 At [23] citing, in relation to the mesne process, Sutherland Mesne Process in Early Common
Law (1966) 82 LQREV 482.
6 RJ Sutton The Law of Creditors’ Remedies in New Zealand (Butterworths Wellington 1978) at
18-19.
[9] Mr Knight submitted that the relevant proceeding for the purposes of the application was the bankruptcy proceeding and that Mr Johnson’s presence would be needed to prove the alleged act of bankruptcy on which the proceeding is based. I do not accept this analysis of the situation. Although Mr Johnson’s apparent preparation to leave New Zealand very likely constitutes an act of bankruptcy under s 20 of the Insolvency Act 2006 it does not provide the basis for an order for arrest under r
17.88 because judgment has already been obtained and the bankruptcy proceedings are by way of enforcement of that judgment. Section 55 does not apply.
[10] Mr Knight’s alternative submission was that it was open to me to exercise the inherent jurisdiction for the issue of a writ of ne exeat regno, a prerogative writ that s 55 replaced.7 In Parsons v Burk, which concerned an application for a writ of ne exeat regno to prevent the All Blacks team leaving New Zealand to travel to South Africa in 1970, Hardie Boys J canvassed the history and use of the writ and said:8
In practice the writ ne exeat regno was only used as part of the process of the Court of Chancery to prevent a defendant from withdrawing his person and property from the jurisdiction of the Court.
…
It is proper to say that even in its latter usage as a restraint on debtors about to leave the country Judge after Judge has spoken of the caution jealousy and hesitation with which they approached its use even in that context.
[11] Finally, the current ambit and use of the writ in England was carefully considered in Felton v Callis9 and Al Nahkel Trading Ltd v Lowe.10 In the latter, Tudor Price J said of Megarry J’s decision in Felton v Callis:11
But in an extensive and learned judgment he held that the writ ne exeat regno was extant but could only issue if the four requirements of s 6 of the Debtors Act 1869 were satisfied. The section of course does not apply to the writ in terms but Megarry J held that on the principle that equity follows the law these conditions applied by analogy. The conditions are as stated by Megarry J at p.211:
(1) The action is one in which the defendant would formerly – meaning before 1869 – have been liable to arrest at law. (2) A good cause of
7 Judicature Act 1908, s 98A; Parsons v Burk [1971] NZLR 244 (SC).
8 Parsons v Burk, above n 7m at 248.
9 Felton v Callis [1967] 1 QB 200, [1968] 3All ER 673.
10 Al Nahkel Trading Ltd v Lowe [1986] 2 WLR 317 (QB).
11 At 319.
action for at least £50 is established. (3) There is ‘probable cause’ for believing that the defendant is ‘about to quit England’ unless he is arrested. (4) ‘The absence of the defendant from England will materially prejudice the plaintiff in the prosecution of his action.’…
Megarry J in Felton v Callis … stated firmly that he could not see any ground for saying that the omission of the old Order 69 in any way affected the validity of either section 6 or the writ itself. He emphasised that because of its drastic character the standard of proof on the applicant for the writ was high and that even if all four conditions were fulfilled it remained a discretionary remedy. But towards the end of his judgment, he said, at p217:
A tool of the law, if of any utility, ought not to be left to rust away through ignorance of its existence. As it seems to me, the writ is still extant, though closely circumscribed in its applicability; and improved means of travel have certainly not lessened its utility.
It appears, however, that in the years after 1968, until this year, the writ was rarely used, if at all. This was doubtless due to the rapid and radical development of the Mareva Jurisdiction which then took place. But in my view in a necessarily small number of cases the additional power in support of the Mareva order is capable of assisting the cause of justice.
[12] I am satisfied that the conditions required by s 55 would also need to be met if a writ of ne exeat regno were to be granted. I am not aware of any case in which such draconian a step has been taken in circumstances that would not satisfy s 55. This application falls well short of meeting those requirements. The application is
dismissed.
P Courtney J
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