Faulknor Property Group v Renall
[2015] NZHC 1328
•11 June 2015
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2014-441-095 [2015] NZHC 1328
UNDER The Insolvency Act 2006 IN THE MATTER OF
The bankruptcy of Kirstyn Ann Renall
BETWEEN
FAULKNOR PROPERTY GROUP Judgment Creditors
AND
KIRSTYN ANN RENALL Judgment Debtor
Hearing: 11 June 2015 Counsel:
C Hall and C A Faulknor for the Judgment Creditors
P Ross for Judgment DebtorJudgment:
11 June 2015
ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] This is an application by the judgment creditors for costs following the settlement of their application for an adjudication order against Ms Renall.
[2] The amount of the claim against Ms Renall was $14,055.82. That sum was paid by Ms Renall on 2 June 2015 from the proceeds of sale of the house property owned by her. $4,000 has been held in trust following the settlement, pending resolution of the judgment creditors’ claim for costs.
[3] Ms Hall asks for an order for costs, on a 2B basis, in the sum of $3,976 together with disbursements of $860. Mr Ross submits that there should be no award of costs: Ms Renall has been on legal aid, and under s 45(2) of the Legal Services Act 2011 no order for costs is to be made against a legally aided person in a civil proceeding unless the Court is satisfied that there are exceptional
circumstances. Mr Ross submits that there are no exceptional circumstances here.
FAULKNOR PROPERTY GROUP v KIRSTYN ANN RENALL [2015] NZHC 1328 [11 June 2015]
[4] Section 45(3) of the Legal Services Act provides:
45 Liability of aided person for costs
…
(3) In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a) any conduct that causes the other party to incur unnecessary cost:
(b)any failure to comply with the procedural rules and orders of the court:
(c) any misleading or deceitful conduct:
(d)any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f) any other conduct that abuses the processes of the court.
…
[5] Both counsel referred to the decision of Hammond J in Awa v Independent News Auckland Ltd,1 in which the learned Judge noted that no intrinsic test for “exceptional circumstances” has been evolved by the Courts. The approach is a fact- specific one. Hammond J noted in his judgment:
As to such, the term “exceptional circumstances” when used in a statute is never free from difficulty. As a matter of general approach, it is usually construed as meaning something like “quite out of the ordinary” and obviously the onus must be on an applicant to establish entitlement in the face of the statutory language.
Those general considerations apart, it is apparent from the decisions to date under this provision that no intrinsic test for “exceptional circumstances” has been evolved by our Courts. Indeed it is hard to see how there could be such a test. The facts of each case are so diverse that both this Court and the Court of Appeal have approached each application in a quite specific way.
[6] I note that the decision in Awa was subject to an appeal to the
Court of Appeal, but I do not apprehend that the Court of Appeal decision affected
1 Awa v Independent News Auckland Ltd, [1995] 3 NZLR 701.
what the learned Judge in the High Court said on the interpretation of the expression
“exceptional circumstances”.
[7] Ms Hall refers to the decision of Asher J in Legal Services Agency v Sylva.2
That was a decision concerned with the lawfulness and application of the Legal Services Agency’s policies and guidelines on travel costs. There was provision for departure from the guidelines in exceptional circumstances. While the context was different from the present case, Asher J made helpful reference to a passage from the judgment of Lord Bingham in R v Kelly.3 In construing a reference to “exceptional circumstances” in that case, his Lordship stated:
We must construe “exceptional” as an ordinary, familiar, English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course or unusual, or special, or uncommon. To be exceptional, a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly or routinely or normally encountered.
[8] Turning to the facts of this case, I note that there have been no fewer than six calls of the application for adjudication. Ms Renall has been granted significant indulgences in an application relating to a debt of only approximately $14,000.
[9] At the first call, on 30 October 2014, Ms Renall initially appeared to acknowledge that a sum of $6,000-$8,000 was owing. However she contested liability for the balance of the debt. She was given an adjournment until
27 November 2014 to obtain legal advice.
[10] When the case was called again on 27 November 2014, Ms Renall had filed a notice of opposition and an affidavit in opposition. The application was adjourned to
12 February 2015, on the basis that $6,000 was to be paid into Court by
10 February 2015 and Ms Renall was to take appropriate steps to have the Disputes
Tribunal decision on which the bankruptcy notice had been based, set aside.
[11] When the case was called on 12 February 2015, Ms Renall had failed to pay the $6,000 into Court. She had applied to have the Disputes Tribunal decision set
2 Legal Services Agency v Sylva [2009] 1 NZLR 279.
3 R v Kelly (Edward) [2000] 1 QB 198; [1999] 2 WLR 1100; [1999] 2 All ER 13 (CA).
aside, and the judgment creditors elected not to oppose that application. The Disputes Tribunal decision was duly set aside, and a new hearing date in that Tribunal was set for 3 February 2015. However Ms Renall failed to appear at the rehearing in the Disputes Tribunal, and the Tribunal’s decision was reinstated.
[12] In a later affidavit filed in this Court, Ms Renall acknowledged that notice of the 3 February 2015 hearing had been sent to her at her correct address, saying that it had been left in an unopened pile of mail. She accepted that her failure to attend the rehearing in the Disputes Tribunal was entirely her own fault, and that she could no longer oppose the application by disputing that the debt was owing to the judgment creditors.
[13] The matter was adjourned to 12 March 2015 on the basis that Ms Renall had equity in her house, and should have an opportunity to either raise finance or realise assets to pay the debt.
[14] When the case was called on 12 March 2015 it emerged that Ms Renall had consulted a financial advisor to assist her in raising finance, but had done so only very shortly before the hearing. She sought a further adjournment to enable her financial advisors to investigate and put together a plan which would see the debt cleared within a reasonable time. The matter was adjourned to 16 April 2015 on the basis that an affidavit was to be provided by the financial advisor within 14 days.
[15] When the case was called on 16 April 2015, no affidavit had been filed by the financial advisor, who had apparently been unavailable in the period since 12 March
2015, or at least for part of that period. Another adjournment was sought. I granted that application, but directed that Ms Renall file the affidavit from her financial advisor within a further seven days. I made an order for costs of $800 in favour of the judgment creditors, to be paid within the same period of seven days.
[16] When the matter was called again on 14 May 2015, a proposal for settlement from the proceeds of sale of Ms Renall’s house had been agreed. The case was adjourned to today to allow for the settlement to be implemented and for counsel to
make written submissions on costs. I have now received and considered those submissions.
[17] In the foregoing circumstances, Ms Hall submits that there has been a pattern of repeated failures to comply with procedural rules and orders of the Court, and that Ms Renall’s conduct has both abused the process of the Court and caused the judgment creditors to incur unnecessary costs. She relies in particular on ss 3(a),(b) and (f) of s 45 of the Legal Services Act, and submits that the circumstances are exceptional.
[18] For Ms Renall, Mr Ross submits that it was perfectly reasonable for Ms Renall to challenge the underlying debt on the basis that the judgment had been irregularly obtained. In respect of Ms Renall’s failure to appear at the
3 February 2015 rehearing in the Disputes Tribunal, he submits that was not a procedural fault with respect to these proceedings. That may be so, but it remains the position that two adjournments were granted to Ms Renall in this Court for the purpose of enabling her to take legal advice and pursue any challenge to the underlying judgment, and her failure to pursue that matter resulted in unnecessary delay and additional costs for the judgment creditors.
[19] Mr Ross also submits that it was inappropriate for the judgment creditors to pursue a bankruptcy application in circumstances where Ms Renall’s asset position was such that it was reasonable to expect she could pay within a reasonable time. I do not accept that submission. Ms Renall was allowed more than a reasonable time to pursue her efforts to refinance and/or sell assets, but she appeared to be of the view that she was entitled to pursue these matters at her own pace, without sufficient concern for the fact that the judgment creditors were entitled to payment of the amount due to them.
[20] I have already awarded costs in respect of the hearings on 12 March 2015 and
16 April 2015, that award reflecting the view that I took that there had by then been too many defaults by Ms Renall. In making that costs award I referred in particular to her failure to attend the Disputes Tribunal rehearing, and her failure to file the affidavit which I had directed on 12 March 2015 was to be filed within 14 days. I
acknowledge that in making that costs order I overlooked the advice which Mr Ross had earlier provided, that his client was on legal aid. The point was not drawn to my attention when the costs order was made.
[21] The $800 costs awarded on 16 April 2015 has been paid, and Mr Ross submits that it is not now open to the Court to consider making any further award of costs – to the extent that exceptional circumstances may have existed, he says that costs have already been awarded.
[22] I do not accept that submission. The costs awarded on 16 April 2015 were in the nature of an interim award of costs designed in part to ensure that Ms Renall would appreciate the importance of compliance with the Court’s directions. The order made on 16 April 2015 was not intended to be a final assessment of costs in the proceeding, and in my view the Court is now entitled to stand back and look at the proceeding as a whole, and assess whether any further award of costs should be made.
[23] Overall, I am satisfied that Ms Renall’s defaults and/or delays, coupled with the unusual number of appearances required of the judgment creditors (and the consequent additional costs incurred by them) take this case out of the ordinary run of bankruptcy cases, and the circumstances are exceptional. The issue then, is what order for costs should be made.
[24] Under s 45(1) of the Legal Services Act, any order for costs must not exceed an amount that is reasonable for the aided person to pay having regard to all the circumstances, including the means of the parties and their conduct in connection with the dispute.
[25] I accept that Ms Renall’s means are not great. She has some cash available from the sale of her house, but the business she has been running appears to have been trading at a marginal level of profitability, and I accept that she is likely to have very little to come and go on. There is nothing to suggest that the judgment creditors may be of limited means. I have already referred to Ms Renall’s various defaults in connection with the conduct of the dispute.
[26] Weighing the considerations I believe an appropriate sum for Ms Renall to contribute to the judgment creditors’ costs of the proceeding is the sum of $1,600, inclusive of the $800 awarded on 16 April 2015, and inclusive of disbursements. That sum allows a reasonable additional sum for the judgment creditors’ costs incurred in respect of the appearances on 30 October 2014 and 27 November 2014, and on 3 February 2015, arising in substantial part from the delays incurred while Ms Renall initiated a procedure to have a rehearing in the Disputes Tribunal which she did not pursue. The balance to be paid by Ms Renall is $800. There will be an order accordingly.
[27] For the purposes of s 45(4) of the Act, the amount Ms Renall would have been ordered to pay if s 45 had not been applicable would have been $4,776 for costs and $860 for disbursements, being the “2B” calculation set out by Ms Hall in her submissions.
Associate Judge Smith
Solicitors:
Carlile Dowling, Napier for Judgment Creditor
Cathedral Lane Law, Napier for Judgment Debtor
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