Erwood v Official Assignee
[2015] NZHC 390
•6 March 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-001755 [2015] NZHC 390
BETWEEN ROBERT ERWOOD
Appellant
AND
THE OFFICIAL ASSIGNEE Respondent
Hearing: 29 September 2014
Further Submissions of Amicus dated 26 November 2014
Reply Submissions of Official Assignee filed 6 January 2015
Additional Reply Submissions of Amicus filed 24 February
2015Appearances:
Appellant Appears in Person
C R Vinnell for Respondent
D M Lester as Amicus Appointed for Mr ErwoodJudgment:
6 March 2015
JUDGMENT OF GENDALL J
Introduction
[1] This is an appeal by the appellant Mr Robert Erwood (Mr Erwood) against decisions of the Official Assignee to take costs and expenses incurred in Mr Erwood’s bankruptcy pursuant to s 86 Insolvency Act 1967. The application is opposed by the Official Assignee.
[2] On 29 September 2014 when this matter was for hearing before me Mr Erwood, the appellant, appeared in person. Mr Lester appeared as amicus appointed by the Court and provided submissions on the appeal, effectively for Mr Erwood. Mr Vinnell appeared as counsel for the Official Assignee.
[3] At the conclusion of the one day allocated hearing for this application on
29 September 2014, it was indicated to the Court that a number of matters were still
ERWOOD v THE OFFICIAL ASSIGNEE [2015] NZHC 390 [6 March 2015]
outstanding. The first was a request by the Official Assignee to provide a short affidavit relating to issues over the Official Assignee’s communication with Mr Erwood throughout the bankruptcy. In particular the Official Assignee says this concerned rising levels of legal and other costs which were incurred by the Official Assignee, details of which it is claimed were discussed with Mr Erwood.
[4] A second matter related to additional submissions which Mr Lester, the amicus on behalf of Mr Erwood, wished to provide. These related to “further grounds of challenge” advanced by Mr Erwood only on 29 September 2014. The Official Assignee was then to have some time to provide supplementary submissions in reply to those submissions of Mr Lester.
[5] Accordingly, following the hearing on 29 September 2014, I issued a minute to deal with these matters which allowed a total period of six weeks from
29 September 2014 for the filing and service of this additional material. [6] Subsequently, the following events occurred:
(a) On 8 October 2014 the Official Assignee filed in this Court the further affidavit of Mr Grant Edward Slevin (Mr Slevin), an employed solicitor with the Official Assignee’s office dated 6 October 2014.
(b) On 26 November 2014 Mr Erwood filed an affidavit dated
25 November 2014 in reply to Mr Slevin’s affidavit.
(c) On 26 November 2014 Mr Erwood himself purported to file in this
Court a document headed “Addendum to Affidavit” dated
26 November 2014 which seemed to include some additions and changes to his earlier affidavit dated 25 November 2014.
(d)Also on 26 November 2014, Mr Lester filed in this Court his further submissions arising from Mr Erwood’s further grounds of challenge in this matter.
(e) On 16 January 2015 the Official Assignee filed his submissions in response to the 26 November 2014 submissions of Mr Lester.
(f) On 24 February 2015 the amicus, Mr Lester, filed submissions on
behalf of Mr Erwood in reply to the Official Assignee’s 16 January
2015 submissions
(g)In addition, both before and since 29 September 2014, Mr Erwood has personally provided to the Court a number of additional documents which have been passed to me.
[7] I have now had an opportunity to consider all the material contained in the documents which have been filed in this proceeding, together with all submissions from counsel and the parties, both at the original hearing on 29 September 2014 and subsequently, and I give my decision with respect to the application which is before the Court.
Background facts
[8] Mr Erwood was adjudicated bankrupt in the High Court at Nelson on 22
November 2007. On 23 July 2013, his bankruptcy, which is determined under the provisions of the Insolvency Act 1967, was annulled in this Court by Mackenzie J.1
[9] Previously on 21 February 2008, Associate Judge Christiansen in this Court had made an order annulling Mr Erwood’s bankruptcy pursuant to s 119(1)(a) Insolvency Act 1967 on certain conditions. Those conditions included a requirement that certain payments to creditors be made under the order. The annulment was never carried into effect however as the payments required under that order were not made.
[10] Over five years later, in his 23 July 2013 decision, MacKenzie J annulled Mr Erwood’s bankruptcy under s 119(1)(b) Insolvency Act 1967 but he declined to make an order under s 119(7) for the remuneration of the Official Assignee. Instead,
in that decision he left it open for the Official Assignee to deduct fees, expenses and
1 The Official Assignee v Erwood [2013] NZHC 1827.
remuneration pursuant to s 104 Insolvency Act 1967. This was on the basis that Mr Erwood, if he disagreed with these deduction decisions, would then have standing to appeal against the Official Assignee’s decisions as “a person aggrieved” under s 86.
[11] Section 104 Insolvency Act 1967 provides for “the money received by the Assignee in the realisation of the property of a bankrupt” to be applied “first, in payment of the fees and expenses properly incurred by the Assignee in carrying out the duties and exercising the powers of the Assignee and the remuneration of the Assignee”.
[12] In reaching his decision about these costs issues, in his 23 July 2013 judgment MacKenzie J noted at para 30:
The level of costs which the Official Assignee has incurred reflects the reality that Mr Erwood has exercised his rights of appeal and challenge to most, if not all, of the decisions affecting him.
…
And:
The difficulties of the Official Assignee in dealing with Mr Erwood’s
approach to his bankruptcy are considerable.
[13] Notwithstanding these comments, MacKenzie J went on to note that the Official Assignee needed to bring an independent view as to how Mr Erwood’s bankruptcy could have been administered at reasonable cost. On the information before him, MacKenzie J therefore declined to approve the level of costs and remuneration sought without appropriate scrutiny as to the steps the Official Assignee had taken.
[14] The Official Assignee has now deducted a total of $181,313.56 for commission, costs and disbursements from Mr Erwood’s estate following his bankruptcy. This amount is calculated as follows:
(a) Official Assignee’s commission provided for under ss 166 and 166A Insolvency Act 1967 and Regulation 49 Insolvency Regulations 1970
(applying Schedule 3) being commission based on the net value of the estate realised – $45,101.14.
(b)Reimbursement of legal costs and disbursements which were incurred by the Official Assignee with external counsel between 7 April 2008 and 13 September 2013 relating to Mr Erwood’s bankruptcy -
$129,381.64.
(c) Reimbursement of a sealing fee of $50.00, a Court of Appeal security for costs payment of $4,740.00, a Court of Appeal application fee of
$1,087.50, and what seems to be a “bulk charges” item for
administrative disbursements of $953.28.
[15] So far as external counsel’s costs and disbursements are concerned, the Official Assignee has presented to the Court a detailed list of these amounts. This list is extensive.
This appeal
[16] It is clear Mr Erwood has standing to appeal against the Official Assignee’s decision to make these deductions from his estate, as “a person aggrieved” under s 86 Insolvency Act 1967 by virtue of there being a surplus in the estate – Re: A Debtor Ex Parte The Debtor v Dodwell.2 (In fact, in the end there turned out to be a considerable surplus in Mr Erwood’s estate.)
[17] There is, however, a limit to a bankrupt’s rights of appeal. In Spratt & McKenzie’s, Law of Insolvency it is noted at [86/2]:
Even where the bankrupt has an interest in the surplus, there is a limit to his rights under this section (s 86). The Court will not, in the absence of fraud, interfere in the day to day management of the estate, nor may the bankrupt question the exercise by the Assignee in good faith of his discretion, nor hold him accountable for an error of judgment.
2 Re: A Debtor Ex Parte The Debtor v Dodwell [1949] 1 All ER 510 at [512].
[18] And, the Court of Appeal in Re: Callis (a bankrupt)3 said the Court should only interfere in cases of fraud, lack of bona fide exercise of the Official Assignee’s discretion, or unreasonableness. In that case Mckay J noted:
The Court is not going to reverse the decision merely because it disagrees with it, a decision made without any attempt at evaluation and without advice, however, is likely to be unreasonable.
[19] Where the appeal is against a decision made in the exercise of the Official Assignee’s discretion, the criteria for a successful appeal are also further limited – Glynbrook [2011] Limited v Official Assignee.4 In the present case, the Official Assignee submits that her decision to deduct commission and external legal costs from Mr Erwood’s estate was the exercise of a discretionary power. Thus this appeal, it is said, is not a hearing de novo where the High Court may confirm, reverse, or modify the Official Assignee’s decision. The criteria for a successful appeal against a decision made in the exercise of a discretion requires:
(a) Error of law or principle;
(b) Taking into account of irrelevant considerations;
(c) Failing to take account of a relevant consideration; or
(d) The decision was one which was plainly wrong.
[20] With all these principles in mind, shortly I will turn to consider the present case. But, before doing so in my view it is useful to reflect upon certain comments made by His Honour MacKenzie J in a judgment dated 24 August 2007 in a not altogether dissimilar case Creser v Creser.5 At para [4] of that judgment MacKenzie J stated:
[4] The surplus (in the bankrupt Mr Creser’s estate) would have been much larger, had it not been for expenses incurred by the Official Assignee in the administration. Administration costs have been very large in proportion to the value of the estate. In particular, legal fees of approximately $120,000 have been incurred. The reason for those high costs
3 Re: Callis (a bankrupt) [1996] 7 NZCLC 261,211.
4 Glynbrook [2011] Limited v Official Assignee [2012] NZCA 289.
5 Creser v Creser HC Wellington CIV-2003-485-2225, 24 August 2007.
is the large number of proceedings in which the Official Assignee has necessarily been engaged. Mr Creser has waged a long battle against other members of his family, in relation to his mother’s estate. The Official Assignee has necessarily been extensively involved in that litigation. In the affidavit in support of the application for discharge, the Official Assignee refers to and annexes no fewer than 10 judgments of this Court and the Court of Appeal on issues in the litigation between February 2003 and December
2006. That compilation is not exhaustive. In addition, there has been a large number of interlocutory proceedings, all of which will have required considerable work on the part of the Official Assignee’s solicitors. It is most unfortunate that the costs incurred in these proceedings should have the effect of reducing substantially the surplus which the Official Assignee could otherwise have returned to Mr Creser. That is, however, a consequence which must follow. Miller J, in his judgment dated 11 May 2006, recorded the Official Assignee’s view, after many dealings with Mr Creser, as being “that he will pursue control of his share (of the estate) even at the expense of dissipating it.” Sadly that prediction has proved to be accurate.
[5] The Official Assignee has, in his affidavit, expressed the opinion that the legal charges provided by Gibson Sheat, the solicitors instructed, are reasonable and in line with the legal costs that the Official Assignee incurs with other external solicitors throughout New Zealand and in particular Auckland, Hamilton and Christchurch. He states that he is aware that in this case Gibson Sheat has not charged for all its attendances in relation to all the issues that Mr Creser has raised in his bankruptcy. I consider that it is appropriate for the Court to rely upon the scrutiny which the Official Assignee has provided over the level of fees incurred. Without undertaking any detailed analysis, a comparison of the number and extent of appearances which must have been involved, and the costs incurred, tends to me to confirm the Official Assignee’s opinion that the costs are reasonable, and indeed to confirm that not all attendances can have been charged for. For this reason, I do not think that it is appropriate to subject this small estate to the additional expense which would be involved in having the costs formally quantified before granting a discharge.
[21] Although it is clear that the facts of all cases are different, the principles involved in the decision of MacKenzie J in Creser v Creser noted above, and the position in the case before me show significant similarities. Just as Mr Creser was involved in considerable litigation during his bankruptcy, so too has Mr Erwood here, with this including the pursuit (as MacKenzie J notes in the quotation set out at [24] following) of every (good and bad) point he could possibly pursue, resulting in attendant difficulties and costs consequences for the Official Assignee.
[22] And indeed, it is instructive to note the comments of His Honour
William Young J in the Court of Appeal in a judgment relating to Mr Erwood’s
bankruptcy given on 23 December 2008 in Erwood v Maxted & Ors v The Official
Assignee6 when he states at paras [5], [6] and [7] of that judgment:
[5] The current situation is unusual to say the least. The Official Assignee has located and frozen money totalling almost $900,000 which he believes to belong to Mr Erwood. These funds far exceed the value of the two claims that have been proved (around $220,000). Mr Erwood allowed himself to be adjudicated by reason of his obdurate refusal to pay the comparatively small sum he owed the first respondents despite this debt being well and truly past the point of challenge. His equally obdurate refusal to comply with court orders resulted in the striking out of CA631/07 and CA567/07. In these respects he has again exemplified his apparent inability to see the wood for the trees: see Erwood v Glasgow Harley [2008] NZCA
572 at [38](a), which is being delivered at the same time as this judgment.
[6] We have deferred issuing this judgment pending the determination of that appeal because in those proceedings Mr Erwood was seeking to impeach the debt of Ms Harley which is much the larger of his two debts. Had Mr Erwood been successful, that would have introduced a significant element of complexity in relation to the bankruptcy. As it turns out, Mr Erwood was unsuccessful.
[7] We see the situation as it now obtains as straight-forward. Mr Erwood can either voluntarily pay his creditors (or put in place a mechanism which ensures that they will be paid) or he can continue to resist doing so. If he takes the former course (which is what he should have done a long time ago), we see no need for advertising and any other formalities. We have no doubt that anyone else with a claim against Mr Erwood and an associated interest in his affairs would have surfaced by now. So if Mr Erwood ensures that his creditors are paid, we see no reason why the bankruptcy should not be annulled. If, however, he adopts the latter course, the adjudication must continue in the ordinary way, with advertising and meetings of creditors…
[23] Later in the Court of Appeal in a further decision relating to Mr Erwood’s bankruptcy given on 17 February 2009, Erwood v Maxted & Ors & The Official Assignee,7 His Honour William Young P went on to note:
[2] This and related appeals have had a turgid history which is reviewed in our judgment delivered on 23 December 2008, Erwood v Maxted [2008] NZCA 571…
[3] Mr Erwood has not ensured that his creditors have been paid and in practical terms has taken no steps towards providing security. Instead, he has filed a number of documents in the Court which are full of complaint about the processes which have been followed to date, including challenges to the composition of the bench – challenges which we reject as groundless.
6 Erwood v Maxted & Ors & The Official Assignee [2008] NZCA 571.
7 Erwood v Maxted & Ors & The Official Assignee [2009] NZCA 19.
[4] The Official Assignee has collected or identified cash assets in excess of $900,000 which apparently belong to Mr Erwood, albeit that ostensibly they are owned by “Robert Wood”. The value of the assets collected far exceeds any likely exposure to creditors. Mr Erwood’s intransigence in relation to Mrs Maxted (who has not yet been paid) thus precipitated a bankruptcy which was eminently avoidable. Throughout he has chosen to insist on what he sees as his rights and has failed to recognise that other participants in this dispute also have rights. In that context, his failure to pick up the option which was left to him in the judgment of
23 December 2008 was unsurprising.
…
[9] There are other aspects of the situation which trouble us… On the basis of the material before us, it seems that Mr Erwood has chosen to hold assets under an alias. The extent of the assets that he apparently owns might come as something of a surprise to those who have been dealing with him. This rather suggests that the public interest now requires the orderly processing of the bankruptcy so that any other creditors can be identified.
[10] In the course of this morning’s hearing, we tried to ascertain Mr Erwood’s stance as to whether he claims to own the money which the Official Assignee has collected and, if so, why this money was held under an alias. He declined to go into these issues as they are apparently relevant to fraud charges which we understand to have been laid in December 2008.
[24] It is also useful here to reflect again upon comments made by His Honour MacKenzie J in his judgment dated 23 July 2003 in The Official Assignee v Erwood8 in which he annulled Mr Erwood’s bankruptcy pursuant to s 119(1)(b) Insolvency Act 1967, part of which I have touched on at [12] above. With regard to the Official Assignee’s application for orders relating to costs under s 119(7) of the Insolvency Act 1967, although, as I have noted, indicating that such orders were not appropriate
at that point, His Honour went on to say:
[30] The level of costs which the Official Assignee has incurred reflects the reality that Mr Erwood has exercised rights of appeal and challenge to most, if not all, of the decisions affecting him. Mr Erwood’s conduct of the litigation, in pursuing every point he could possibly pursue, with a limited ability to distinguish the good and the bad points, has resulted in the Official Assignee incurring costs which any rational assessment of the litigation strategy would have recognised were likely to ultimately be borne by Mr Erwood. The difficulties of the Official Assignee in dealing with Mr Erwood’s approach to his bankruptcy are considerable...
[25] MacKenzie J then proceeded to state that the Official Assignee nevertheless
needed to bring an independent view as to how Mr Erwood’s bankruptcy could have
8 The Official Assignee v Erwood [2013] NZHC 1827.
been administered at a reasonable cost and that an appropriate scrutiny of the costs and fees charged was required. There can be no doubt, in my view however that, from a consideration of all the material which is before the Court, MacKenzie J’s remarks noted at [24] above would seem to be entirely accurate.
[26] I turn now to consider the first amount at issue here, noted at [14] above, being the Official Assignee’s claim to commission totalling $45,101.14.
Commission
[27] Material before the Court provided by the Official Assignee maintains that the Official Assignee’s actual time costs in administering Mr Erwood’s estate amounted to over $170,000. An acknowledgment is made in an affidavit provided on behalf of the Official Assignee that “these costs are extraordinarily high due to the complexity of Mr Erwood’s affairs and the extent to which he has involved himself in the administration of his estate”.
[28] Time costs, however, are not recoverable by the Official Assignee in this case. This is because this bankruptcy was to be determined under the Insolvency Act
1967, where time costs were not properly chargeable. Instead, remuneration for the Official Assignee was provided for under the 1967 Act in ss 166 and 166A and in reg 49 Insolvency Regulations 1970 applying sch 3. Schedule 3 settled commission amounts based on the net value of the estate realised rather than the debts paid.
[29] Notwithstanding this, the Official Assignee notes that her usual practice for highly solvent estates was to base commission on the amount for unpaid debts, as annulments in such cases were often obtained swiftly at minimal expense. It was regarded therefore that in these cases it would have been unfair to levy a charge for a minimal amount of work based on substantial value assets.
[30] In the present case, however, the Official Assignee maintains that throughout Mr Erwood was not interested in paying his creditors and caused the Official Assignee to incur extraordinary time costs. Whereas initially in 2011 the Official Assignee had given an indication that she intended to levy a commission of about
$12,000 based upon the amount of debts paid, this concession was withdrawn some
two years later. This was when she reverted to her statutory entitlement of
$45,010.14 as commission levied on the amounts recovered, in light of the huge amount of work to which she said she and her staff had been put.
[31] So far as this $45,010.14 commission claim is concerned, Mr Lester suggested in his submissions that, given the level of Mr Erwood’s assets, an annulment should have been achieved in early 2008 and the Official Assignee needs to be seen as having some responsibility in this bankruptcy not coming to an early end at that point. With respect, however, having read all the material which is before the Court I take a different view. Throughout, at no time did Mr Erwood provide to the Official Assignee a statement of his assets, debts and liabilities, nor can it be said that he complied with his general duties as a bankrupt to assist the process in terms of the Insolvency Act 1967. As I understand the position, he refused to provide information to or co-operate with the Official Assignee, at no stage would he meet on a proper basis with the Official Assignee, he threatened negligence actions against the Official Assignee, and generally he would deal with relevant staff only on the telephone when he rang them, again often providing no contact details for himself.
[32] Next, Mr Lester suggested that the Official Assignee was involved in a second error here, being the fact that Mr Erwood was kept in bankruptcy much longer than he should have been, thus compounding costs and detriment to him. But, for reasons I develop further at [52] to [57] following, I reject this contention also.
[33] And, insofar as Mr Erwood’s application to annul his bankruptcy in early
2008 was concerned, the comments of the Court of Appeal I note at paras [22] and [23] above, are apposite here. It was always open to Mr Erwood to comply with the conditions of the annulment order made by His Honour Associate Judge Christiansen and even to negotiate a security arrangement for debts he disputed at that point, but he chose not to do this.
[34] It is difficult to escape the conclusion that Mr Erwood has simply been the author of his own misfortune here.
[35] And, as to the $45,010.14 commission deducted by the Official Assignee, before me the quantum of this amount was not contested in any real or detailed way. It is a straight percentage calculation. I am satisfied that, under all the circumstances prevailing in this case, the Official Assignee, being statutorily entitled to commission of this amount, acted properly in deducting this sum from Mr Erwood’s estate.
[36] For these reasons I dismiss Mr Erwood’s appeal and objection to the payment
by way of deduction of this $45,010.14 commission to the Official Assignee.
External legal costs
[37] As I note at [14](b) above, external legal costs and disbursements which the Official Assignee has deducted from Mr Erwood’s estate amount to $129,381.64. Counsel for the Official Assignee advises, however, that total external legal costs incurred for the period in question between 7 April 2008 and 13 September 2013 amounted to $151,695.39. The Official Assignee has agreed that Mr Erwood’s estate should not have to bear external legal costs incurred in respect of the Official Assignee’s appeal to the Court of Appeal against the High Court decision relating to the proof of debt of Ms Harley. Those costs amount to $22,263.75. Although it is said they were legitimately incurred in the course of the bankruptcy, apparently they are not being claimed now and this amount has been deducted from the total external legal costs figure.
[38] The Official Assignee has presented a detailed analysis of those external legal costs. She says also that she has made a careful determination of which costs should be excluded relating to the Harley claim appeal.
[39] Generally as to the legal costs deducted, the Official Assignee’s position is that they relate to attendances carried out by external legal counsel, Mr Chisnall, who is an acknowledged insolvency expert, and they can be summarised as follows:
(a) Appeals to the Court of Appeal against a High Court order not to set aside the bankruptcy notice against Mr Erwood and the order for adjudication (both requiring affidavits, memoranda and appearances in the Court of Appeal);
(b)Advice on the Harley claim (including an application for leave to appeal out of time);
(c) A Court of Appeal application to recall the earlier Court of Appeal judgment;
(d) A Court of Appeal application for removal of the stay of advertising
of Mr Erwood’s bankruptcy;
(e) Dealing with other complaints by Mr Erwood against the Official
Assignee;
(f) Advising on annulment options; and
(g) An appeal to the Court of Appeal regarding the Harley claim.
[40] The Official Assignee says that the total external costs sought are appropriate here, given the timeframe, the plethora of multiple complex claims and the other complaints and issues constantly raised by Mr Erwood throughout his bankruptcy.
[41] Interestingly, the Official Assignee draws attention to material before the Court which seems to indicate that at the commencement of his bankruptcy Mr Erwood had extant not less than five separate sets of proceedings which he had brought and that, following his bankruptcy, from a review of an internet-based legal research facility (NZLII) there were no less than 23 court judgments involving Mr Erwood as a party (which may of course have included cases brought against Mr Erwood) previously.
[42] Although there have been suggestions that Mr Erwood has been suffering from some form of mental illness, a useful insight into the difficulties the Official Assignee has faced in dealing with Mr Erwood and his fixation with litigation is
found in the comments of His Honour Miller J in the Wellington High Court.9
9 CRI-2010-485-24 at paras [15] and [17].
[15] …I do not attach weight to the District Court finding that Mr E is able to appoint and pay counsel. I agree that he has the intellectual and financial resources to do so, albeit that he might need the Official Assignee’s consent, but I am prepared to treat his refusal as a manifestation of the mental illness that undoubtedly afflicts him, seemingly manifesting itself in an obsession with legal issues.
And:
[17] Further, it does not necessarily follow from the finding of unfitness to stand trial that Mr E is incapable of arguing his own appeal, for two reasons. First and most importantly, he is in fact capable. Like the District Court Judge, I found him shrewd and alert to the issues. He demonstrated knowledge of Court protocol and processes. He pointed to relevant considerations, while courteously declining (citing incapacity) an invitation to expand on the merits…
[43] Turning now to submissions advanced by Mr Erwood and on his behalf by Mr Lester, the appointed amicus, it is clear that a primary argument for Mr Erwood here focuses on events at the outset of his adjudication. Having been adjudicated bankrupt on 22 November 2007 Mr Erwood appealed the adjudication order on
26 November 2007. The Court of Appeal on 13 December 2007 stayed public advertising of his bankruptcy.
[44] Mr Erwood also at that point filed an application to have his bankruptcy annulled and this came before Associate Judge Christiansen on 21 February 2008. As noted above, an annulment order was made conditional on the two creditors who had claimed at that stage (Ms Maxted and Ms Harley) being paid. As mentioned, that did not happen and the annulment was not put in place.
[45] Mr Erwood complains that the Official Assignee played a part in the annulment hearing such that the annulment process misfired. This led to Mr Erwood remaining in bankruptcy, he says, over an extended period which should not have happened.
[46] The complaint here relates to the suggestion that at this early point the Official Assignee had not indicated to the High Court considering the annulment application that the debt claimed by Ms Harley had not been fully accepted and, indeed, a major part of it was disputed by Mr Erwood (and he was successful some time later in overturning part of that debt).
[47] As to that aspect, I reject any suggestion advanced on behalf of Mr Erwood that the Official Assignee acted in any improper or misleading way with regard to this 21 February 2008 annulment decision. I have already mentioned aspects of this claim at [31] above. But also, in February 2008, the Official Assignee had located and frozen bank accounts totalling a little over $300,000, I understand, held in the name of an alias used by Mr Erwood, despite the fact that he had failed to provide any schedule or details of his assets and liabilities. The report provided by the Official Assignee at this relatively early point for consideration by the High Court as part of the annulment application was in an entirely standard form. Once the conditional annulment order had been made by His Honour Associate Judge Christiansen on 21 February 2008, it was within Mr Erwood’s power simply to agree that the debts in question could be paid (or after negotiation in the case of the Harley debt secured) in order that his bankruptcy could have been annulled at that point. That this did not occur, as I see it, must lie entirely with Mr Erwood. I do not accept that the Official Assignee had any responsibility for this annulment process “misfiring” as has been suggested on behalf of Mr Erwood.
[48] Next, Mr Lester in particular has raised an issue concerning what he describes as “Mr Erwood’s mental health issues”, such that there must be some real suggestion as to his capacity and ability to participate in the bankruptcy processes which were being undertaken.
[49] In response to that, I refer to para [42] above and the comments of
His Honour Miller J outlined there.
[50] I too, like Miller J, am of the view from all the material before me that Mr Erwood, through his many years of being obsessed with and fixated upon litigation and disputes, is more than capable of understanding the processes involved here.
[51] I reject any suggestion therefore that the Official Assignee should only be entitled to costs, including external counsel’s costs, up to February 2008, and not beyond.
[52] Next, the argument is advanced on Mr Erwood’s behalf that one reason his bankruptcy continued for so long causing further costs to be incurred was an objection by the Official Assignee to his being discharged in October 2010. This was, notwithstanding that more than sufficient funds were held throughout to meet his debts.
[53] On that aspect, there is affidavit evidence before the Court filed on behalf of the Official Assignee which seems to indicate quite clearly that the Official Assignee had indicated to Mr Erwood in advance why she would oppose him being released for strategic reasons. The evidence clearly indicates that Mr Erwood consented to the decision by the Official Assignee to adopt the position that he should remain in bankruptcy, although it seems from submissions advanced now that Mr Erwood contends that he did not so agree.
[54] The Official Assignee says that the reason for this decision on her part was:
…To preserve (Mr Erwood’s) rights to seek an annulment and the effect an annulment (would) have on Mr Erwood’s right to pursue litigation that he had been unable to pursue during his bankruptcy.
[55] What seems clear to me on all of this is that throughout and including at this particular time Mr Erwood was still endeavouring to have his bankruptcy annulled and to use every possible court opportunity to achieve this. In the end the tactical decision made was one for him.
[56] I am satisfied that in considering first, all the circumstances of the events which were occurring at the time and secondly, the actions being undertaken then by Mr Erwood, and thirdly, in analysing all the material which is now before the Court, I am of the view that the Official Assignee cannot be held responsible for any decision that Mr Erwood was not released from bankruptcy at that time.
[57] Again, noting the direct warnings and indications given to Mr Erwood by His Honour William Young J in the Court of Appeal (as outlined at paras [22] and [23] above) there were clear options open to Mr Erwood at the time which he refused to take. For him to suggest that he is not the author of his own misfortune now is wide of the mark.
[58] Curiously, there is also evidence before the Court in the affidavit of Mr Slevin that Mr Erwood in addition opposed attempts made by the Official Assignee to repay surplus funds to him during his bankruptcy, presumably showing his clear desire to prolong matters. Further, there can be little doubt here that Mr Erwood on a number of occasions through his bankruptcy was told that significant costs were being incurred and that the Official Assignee intended to deduct these from his estate. Indeed, Mr Erwood himself seeks to rely on certain letters he sent to the Official Assignee warning her that he would take the position that he would not be liable for the further costs she had outlined were mounting.
[59] As to the quantum of external costs and disbursements sought here, an
analysis of Mr Chisnall’s total costs appears to show an ex GST figure of
$78,647.17. His hourly rate in 2010, I understand from material before the Court, was $350. Thus over the three year period at issue, this would amount to some 224 hours. In considering all the material before the Court and his invoices, I find this represents a relatively modest time commitment given the considerable number of issues and litigation that he was involved in caused by Mr Erwood’s dealings with the Official Assignee.
[60] In this regard, evidence before the Court for the Official Assignee in an affidavit of Mr Fildes dated 16 April 2013 confirms that these external legal costs were “reasonable and in line with the legal costs the Official Assignee incurs with her other external solicitors/counsel.” From my consideration of all the material here I conclude also that the level of costs charged would not seem to be excessive.
[61] And, on the issue of quantum, I remind myself that the matter before me is not a costs revision exercise but instead is a consideration of whether the Official Assignee has properly exercised her discretion to deduct these amounts for internal costs from the funds in Mr Erwood’s estate. In considering this appeal, despite lengthy supplementary submissions which I have received (both from Mr Lester, and a reply from Mr Vinnell) as to individual legal invoices and their amounts, in my view a detailed analysis and justification of the expenses incurred in each invoice is not required or appropriate.
[62] As I see the position the Official Assignee here acted throughout in good faith in very difficult circumstances and moreover, she conducted this time consuming bankruptcy in a proper fashion. The evidence before the Court put forward on behalf of the Official Assignee shows that a careful scrutiny has been undertaken, over quite some time, relating to the work involved and the level of external legal fees incurred in this bankruptcy. Indeed, it does seem that not all attendances here have necessarily been charged for and certainly a credit has been given for the Harley Court of Appeal matters. Without undertaking a detailed invoice by invoice analysis in this case, I am satisfied that in comparing the number and extent of appearances and attendances which have involved legal counsel here, the external legal costs are reasonable and properly incurred.
[63] For these reasons I dismiss Mr Erwood’s appeal and objection to the payment by way of deduction of the $129,381.64 external legal costs and disbursements which were incurred by the Official Assignee between 7 April 2008 and
13 September 2013.
Sealing fee, CA application and security for costs fees and bulk charge disbursements
[64] At para [14](c) above, I refer to additional amounts included in the Official
Assignee’s deduction for costs and disbursements as follows:
(a) Reimbursement of sealing fee - $50.00
(b) Court of Appeal security for costs payment - $4740. (c) Court of Appeal application fee - $1087.50.
(d) Bulk charge disbursements item - $953.28.
[65] Before me no real argument was addressed to these items, nor were they in any real way challenged by or on behalf of Mr Erwood.
[66] Effectively therefore, given the nature of these disbursement amounts, and without opposition from Mr Erwood, the only course available is to dismiss Mr Erwood’s appeal and objection to the payment by way of deduction of these amounts by the Official Assignee.
Conclusion
[67] For all the reasons outlined above Mr Erwood’s appeal and objection pursuant to s 86 Insolvency Act 1967 to the decisions of the Official Assignee to take the costs and expenses referred to at para [14](a), (b) and (c) above is dismissed.
[68] As to costs on this appeal, given that the Official Assignee has been successful in opposing this appeal I see no reason why costs should not follow the event in the normal way.
[69] Costs are therefore awarded on her successful opposition to this application to the Official Assignee on a category 2B basis together with disbursements (if any) as fixed by the Registrar.
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Gendall J
Solicitors:
Anthony Harper, Christchurch
Dale Lester, Christchurch
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