Fava v Official Assignee

[2013] NZHC 564

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-4669 [2013] NZHC 564

BETWEEN  PHILIP JOSEPH FAVA Applicant

ANDOFFICIAL ASSIGNEE Respondent

Hearing:         20 March 2013

Appearances: Philip Joseph Fava in person

J McBride for Aral Property Holdings Limited, a creditor

No appearance for Official Assignee (abiding decision of the court) Judgment:  20 March 2013

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Bell Gully (R G Simpson) P O Box 4199 Auckland 1140, for Aral Property Holdings Ltd, a Creditor

Email:   [email protected]

Copy for:

J D McBride, P O Box 1008 Auckland 1140, for Aral Property Holdings Ltd

Email:   [email protected]

Guy Caro, Ministry of Economic Development, Priovate Bag 92 513 Auckland 1141 for Respondent

Email:   [email protected]

Philip J Fava, PO Box 37 606 Auckland

Email:   [email protected]

FAVA V OFFICIAL ASSIGNEE HC AK CIV-2011-404-4669 [20 March 2013]

[1]      On 7 November 2012 I gave a decision on the application by Aral Property Holdings Ltd that Mr Fava provide security for costs on his proceeding under s 238 of the Insolvency Act 2006.  I fixed security for costs in the sum of $20,000.  I said that that proceeding would be stayed if Mr Fava failed to pay that sum into court by

26 November 2012.  I further provided that if Mr Fava did not pay the security for costs into court by 8 February 2013 Aral Property Holdings Ltd may apply under r 7.48 to strike out the s 238 proceeding.

[2]      Mr Fava did not provide any security for costs.  The time for him to seek a review of my decision was extended – but that was later abandoned.

[3]      On 28 February 2013 Aral Property Holdings Ltd applied for an order that Mr Fava’s statement of claim be struck out and for costs.  I now consider the strike- out application.  It is common ground that Mr Fava has not provided the security for costs.

[4]      Ordinarily, on an application to strike out for non-compliance with an order for security for costs, the court will enquire into whether there has been compliance with the order, and if there has been non-compliance, will establish the extent of non-compliance.   Typically those facing strike out applications say that although they are in default they are in a position to remedy the default shortly.  The court might consider extending time for compliance.  However, Mr Fava has not taken that course.

[5]      When I made the original order for security for costs against Mr Fava I was all too conscious that he was an undischarged bankrupt.  I was aware that he might have difficulty raising security for costs.   I allowed him time to arrange it.   Even though his assets are vested in the Official Assignee because of his bankruptcy, I did consider  that  there  may  be  assets  available  to  assist  him  from  other  sources. Similarly, he may be able to find a litigation funder to assist him in the litigation.  In other words, I intended the time for him to comply to be a real opportunity to take proper steps which would allow him to continue his claim if security was adequately

provided.  However, Mr Fava has not suggested that he has taken any steps at all to attempt to comply with the order to provide security for costs.  He has taken a totally different approach to this matter.

Mr Fava’s application to rescind

[6]      He initially filed a notice of opposition, asking the court not to strike out in its discretion, but this morning he tendered a fresh notice of opposition.  That fresh notice of opposition proposed that the decision I had made for security for costs was obtained improperly because material information had been mischaracterised or withheld from the court, and that my order should be rescinded.

[7]      Mr Fava directed his submissions at that ground  – that is, he sought  to persuade me that I should re-visit the original decision to fix security for costs.  He did not direct any submissions at all to what orders I should make if I did not accept his proposal to rescind my original order.

[8]      In   support   of   his   rescission   application,   Mr   Fava   tendered   written submissions and two bundles of documents running to some 500 pages.  The overall thrust of his argument was that there had been a miscarriage of justice in the costs judgment of Hugh Williams J of December 2009.  That miscarriage of justice was traceable back to the misconduct of the lawyers acting for Aral Property Holdings Ltd.  Mr Fava’s argument gave a lengthy analysis why he had been done an injustice at the hands of Aral’s lawyers during the litigation which culminated in the costs judgment of Hugh Williams J.  There was particular reliance on the allegations against Mr Simpson and as to information provided in confidence by Mr Chong (a witness) to counsel for Churchill which it was alleged Mr Simpson had misused. Mr Fava also emphasised that he had been repeatedly “hammered” by Aral’s lawyers for coming up with ill-founded misconduct allegations against them.

[9]      It is unnecessary for this decision for me to traverse those submissions and to answer them in detail.   That is because they have been considered and addressed many times before.  In particular, Hugh Williams J considered and analysed them at length in his costs judgment of December 2009.

[10]     Mr Fava refers to an affidavit of Mr Stewart QC, which is said to cast one of the findings of Hugh Williams J into doubt. At the end of the day that does not make much difference.

[11]    The point has been made a number of times that even if Mr Fava were to succeed in his arguments that Hugh Williams J got his costs judgment wrong in fixing the amount of costs payable, Mr Fava would still be exposed to costs personally.  The most that Mr Fava could have hoped for would be to have the order for costs against him reduced from paying solicitor/client costs to paying only scale costs.  He would still have been exposed to an order for costs – I understand some

$200,000  at  least  –  and  his  inability  to  pay  would  still  have  resulted  in  his bankruptcy.

[12]     A proceeding which at best can only have the effect of adjusting the amount for which Aral has claimed is ultimately a fruitless proceeding when Mr Fava apparently has no assets which could be available to the creditors and when no other creditor has claimed in Mr Fava’s bankruptcy apart from Aral.

[13]     I emphasise that Mr Fava’s arguments have been put to the courts many times.   Mr Fava has failed many times to persuade the courts that these are live issues that require the courts to look again at the decision of Hugh Williams J.  For this hearing, Mr McBride prepared a table which sets out a number of court events where Mr Fava has attempted to overturn the decision of Hugh Williams J.  In all, there are 21 court events.  Not all of them are steps taken by Mr Fava.  They include Aral obtaining an order adjudicating Mr Fava bankrupt.  They also include the Official Assignee’s admission of Aral’s claim. Mr Mc Bride has also included Aral’s application for security for costs.   But by and large the bulk of the entries on the table  are  steps  taken  by  Mr  Fava  to  challenge  the  costs  judgment  of  Hugh Williams J.

[14]     Mr Fava’s submission that I should look again at these issues is misconceived because the matter has been traversed many times before.  He has raised, again, arguments that were put to me in the security for costs application.  In my security for costs decision I found that Mr Fava had little going for him on the merits in his

proceeding under s 238 of the Insolvency Act 2006.  In coming to my decision on security for costs, I took that into account against other factors – including Mr Fava’s interest in having his case determined on its merits – but also the interests of Aral which was in the position of a defendant.  It had obtained an order for costs which had not been paid and which was now under attack.  I found that the balance lay in favour of protecting Aral against the continuation of this proceeding without an order for security for costs.  Mr Fava has emphasised only one side of the equation – his desire to have a hearing on the merits without in any way addressing the need to protect Aral against the continuation of this proceeding when any order for costs would be barren.

[15]     I decline to rescind the order I made for security for costs.  The submissions advanced by Mr Fava have not persuaded me that I should take any different view as to the merits from the one I took in November last year.  That is the same as the view taken by other judges who have been asked to look at the matter on earlier occasions.

The strike-out application

[16]     In Prager-Macholl v Michell[1]  I heard an application to strike out when a plaintiff had failed to provide security for costs as ordered by the court.  I applied the principles established by Thorp J in Jagwar Holdings v Fullers Corporation Ltd.[2]

[1] Prager-Macholl v Michell (2011) 20 PRNZ 364 (HC).

[2] Jagwar Holdings v Fullers Corporation Ltd (1991) 4 PRNZ 577 (HC).

I said that such applications raise these questions:

(a)       Has the plaintiff had a reasonable opportunity to comply with the order for security for costs?

(b)Can the defendant rely on the general ground of failure to prosecute under r 15.2?

(c)       Is the plaintiff’s non-compliance intentional or contumelious?

(d)Will continuation of the proceeding involve substantial prejudice to the defendant?

[17]     I consider the strike-out application by reference to those matters as well.

Has Mr Fava had a reasonable opportunity to comply with the order for security for costs?

[18]    I fixed the security for costs order on 7 November 2012.  Mr Fava was represented. He was also present in court when I made that order.  It is now some four months since I made that order.  I had given him until 8 February 2013 to come up with security, following which an application for strike-out might be made.  That was three months ago – he has had more than a month since then.   In fixing the period of three months I had regard to what I considered would be a reasonable period for a man in Mr Fava’s position either to raise the funds somehow, or to obtain funding from a litigation funder.  I have heard nothing to persuade me that it was an unreasonable time within which Mr Fava could put funding in place to allow him to continue the proceeding.  I find that he has had reasonable opportunity to comply and that he has not complied within that time.

Can Aral rely on the general ground of failure to prosecute under r 15.2?

[19]     Mr McBride placed some weight on this argument.  However, r 15.2 usually requires a defendant to establish three matters:

(a)       Inordinate delay by the plaintiff; (b)     That the delay is inexcusable;  and

(c)       That the delay is causing serious prejudice to the defendant.

[20]    Applications under r 15.2 are normally made after a proceeding is left to languish, unresolved, without being progressed in any significant way.  In general, applications under r 15.2 are made only when a limitation period has expired.  At earlier stages it is regarded as unuseful to strike out the proceeding if the plaintiff can

start again.  These days, with the systems of case management, cases do not tend to languish. Accordingly applications under r 15.2 are relatively rare.

[21]     In  this  case,  the  litigation  from August  2011  has  been  pushed  along  by Mr Fava,  although  it  has  taken  a  rather erratic  course.    But  one cannot  accuse Mr Fava of inactivity.  He has endeavoured to pursue the matter to hearing, although it has been diverted by security for costs applications and an appeal to the Court of Appeal against the costs decision of Peters J.  But that is not an inordinate delay in the conduct of the proceeding generally.

[22]     Similarly, while there has been delay in regard to security for costs, that is not overall inordinate delay under r 15.2.  I find that Aral Property Holdings Ltd cannot rely on the general ground of failure to prosecute under r 15.2.

[23]     I therefore need to consider the remaining criteria.

Is Mr Fava’s non-compliance intentional and contumelious?

[24]     It is important to note Mr Fava’s approach to the security for costs orders, and to consider it against the background of his past conduct.  The relevant past conduct is that a number of costs orders had been made against him right throughout the litigation leading up to the decision of Hugh Williams J.  Those costs orders had not been honoured.  He has not paid anything under the costs order of Hugh Williams J. He has not paid any of the costs orders made against him since his bankruptcy. There is a general course of conduct of Mr Fava taking proceedings, not being deterred by the prospect of orders for costs going against him, and ignoring orders for costs. That is conduct that can be characterised as vexatious and contumelious.

[25]     As to his conduct in relation to the orders I made in November 2012, he has treated the court to arguments as to why the original orders were wrong but has not addressed the need to comply with the orders themselves.  He has maintained a consistent approach of not taking to heart requirements to provide security for costs or to meet orders for costs.  It is conduct like that, that led me to require security in

the first place.  In effect, when he invites the court to rescind its order, he is saying that he is not intending to comply with the order, regardless of its merits.

[26]     I regard that kind of attitude to the order I made for security for costs as being intentional and in contumelious disregard of the orders of the court.  I find that Aral has satisfied the third requirement.

Will  the  continuation  of  the  proceeding  involve  substantial  prejudice  to  Aral

Property Holdings Ltd?

[27]     I find that that requirement is also satisfied.  I come back to the table which Mr McBride provided.   It is quite plain that since December 2009 Aral and its lawyers have been subject to repeated attacks by Mr Fava.  They have succeeded in their litigation, and been vindicated by Hugh Williams J. Aral Property Holdings Ltd has been required to give costs ongoing attention, even though a final decision has already been given in its favour and attempts to appeal that decision have been unsuccessful.

[28]     The finality of the decision should be respected.  Requiring Aral to constantly front-up and face the kind of criticism that has been repeated today, represents a continuation of vexatious conduct by Mr Fava.  Aral is entitled to be protected from that.  Aral has accordingly made out the fourth ground under the test in the Prager- Macholl decision.

[29]     There is a residual discretion.   Looking at the matter overall, Mr Fava is trying to have the decision of Hugh Williams J re-visited.  It is a fruitless pursuit. Hugh Williams J gave Mr Fava a very full hearing over six days; he gave a very lengthy considered decision.  The decision has not been disturbed, despite Mr Fava’s attacks ever since.   Mr Fava ought not to be  allowed to continue to  attack the decision further.

[30]     In the absence of any proposals from Mr Fava to protect Aral by way of security for costs, I see no good ground for allowing him to continue this proceeding. I strike it out.

[31]     Mr McBride seeks costs.  I award Aral costs on a 2B basis.  If the parties are unable to agree costs then memoranda may be filed.

......................................................

Associate Judge R M Bell