Fleetpartners NZ Trustee Limited v Thorn

[2022] NZHC 836

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-787

[2022] NZHC 836

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of ANDREW JOHN THORN

BETWEEN

FLEETPARTNERS NZ TRUSTEE

LIMITED as trustee for the

FLEETPARTNERS NZ TRUST t/a FLEETPARTNERS GROUP

Judgment Creditor

AND

ANDREW JOHN THORN

Judgment Debtor

Hearing:	On the papers
Counsel:	No memorandum filed for Judgment Creditor S Moore for the Judgment Debtor
Judgment:	27 April 2022

COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 27 April 2022 at 3.30pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel: Akarana Legal, Auckland

Integris Law Firm, Auckland S Moore, Barrister, Auckland

FLEETPARTNERS NZ TRUSTEE LIMITED v THORN [2022] NZHC 836 [27 April 2022]

Introduction

[1]                  On 1 July 2021, I granted leave to withdraw the application for adjudication of the judgment debtor following the filing of a joint memorandum dated 30 June 2021. The joint memorandum recorded that costs had not been resolved and requested that leave be reserved for the parties to file memoranda if costs could not be agreed between the parties.

[2]                  A Minute was issued on 1 July 2021 reserving such leave prior to the scheduled call that morning. No date was set in the Minute by which costs memoranda were required to be filed.

[3]                  A memorandum was filed on behalf of the judgment debtor on 2 February 2022 seeking costs on a 2B basis of $2,390. The costs sought are for the drafting of a memorandum seeking an adjournment (0.4 x $2,390), an appearance at a call-over (0.2 x $2,390) and for the drafting of a costs memorandum (0.4 x $2,390).

[4]No memorandum has been filed on behalf of the judgment creditor.

Relevant costs principles

[5]                  When a proceeding is discontinued, r 15.23 of the High Court Rules 2016 provides a presumption that the plaintiff must pay the defendant’s costs unless the defendant agrees or the court orders otherwise.

[6]The principles applying to the r 15.23 presumption are summarised in

McGechan on Procedure:1

(a)The r 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant had the advantage of the presumption even where there has not been such unreasonableness.

(b)Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the court finds there are circumstances which make it just and equitable that it should not apply.

1      Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.23.01].

(c)Although the court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:

(i)The court will not consider the merits of the respective cases unless they are so obvious that they should influence the costs outcome.

(ii)The court will consider the reasonableness of the stance of both parties up to the point of discontinuance: whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.

(iii)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However it must be clear that the plaintiff would have succeeded had the circumstances … not changed …

(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.

Background

[7]                  Considering the steps taken in this matter, the filing and service of the application for adjudication was more convoluted than usual.

[8]                  An application was required to be made for substituted service of the bankruptcy notice following several failed attempts to serve the judgment debtor. One of the affidavits filed in support of the application for substituted service by Sandhya Thukral confirmed that the bankruptcy notice had originally been filed in the High Court in Christchurch in May 2019 (CIV-2019-409-280). The judgment creditor directed an agent to serve the bankruptcy notice at the address for the judgment debtor on the creditor’s file in Christchurch. The agent was unable to serve the documents on the judgment debtor and a new possible address was located for the judgment debtor in Christchurch. The judgment debtor however was not known at this address. The judgment debtor then contacted the service agent by text and advised that he was now in Auckland. A copy of the agent’s report is annexed to the affidavit recording that although the judgment debtor informed the service agent that he was in Auckland he would not give the agent an address.

[9]                  As the bankruptcy notice expired in December 2019, the judgment creditor instructed that a new bankruptcy notice was to be prepared and filed.

[10]              The affidavit further records that searches identified the judgment debtor was the director of several companies with an address in Auckland recorded on the Companies Register. The judgment creditor’s agent attempted service at the address but again personal service of the bankruptcy notice could not be effected.

[11]The judgment creditor therefore applied for an order for substituted service.

[12]              Orders were made as sought on 27 October 2020 dispensing with personal service and directing that service could be effected by serving the bankruptcy notice on any adult occupant at the address for the director recorded on the Companies Register or by putting the documents in a sealed envelope addressed to the judgment debtor in the mailbox at the address, and by advertising in the public notices section of the New Zealand Herald.

[13]              These steps were completed by the judgment creditor. The judgment debtor failed to respond to the bankruptcy notice so the judgment creditor applied for an adjudication order.

[14]              Counsel were instructed for the judgment debtor at that stage and a memorandum was filed seeking an adjournment of the first call on 13 April 2021. The judgment creditor consented and the matter was adjourned to 17 May 2021. On that date a further adjournment was granted to allow further discussions with the judgment debtor and to allow the judgment creditor to provide evidence of the date of filing and payment of the filing fee to confirm that the judgment creditor’s application had been filed within three months of the act of bankruptcy.

[15]              A joint memorandum was then filed on 30 June 2021 seeking a discontinuance on the basis that all matters apart from costs had been resolved between the parties.

[16]              Over six months later the judgment debtor has filed a costs memorandum seeking 2B costs of $2,390.

[17]There has been no response by the judgment creditor.

Discussion

[18]              The judgment debtor submits that the High Court Rules require that the unsuccessful party to a proceeding or interlocutory application should pay the costs of the successful party. In essence, that “costs should follow the result”.2 The judgment debtor submits that as the successful party he is entitled to costs.

[19]              As set out above however, where a party discontinues a proceeding, r 15.23 applies. The relevant question then is whether it is just and equitable for the presumption that the party who discontinues a proceeding pays costs to the other to be displaced.

[20]              The memorandum filed on behalf of the judgment debtor does not set out why the judgment debtor ought to be considered the successful party. It may be that some or all of the debt claimed was paid as part of the resolution or that the judgment debtor satisfied the judgment creditor that they would receive nothing even if he was bankrupted.

[21]              The difficulty in an application to adjudicate a judgment debtor bankrupt is that the decision to discontinue may be made for a number of reasons including to avoid the costs of continuing the proceeding.

[22]              The steps leading up to the filing of the application as set out above make it clear that the judgment debtor avoided service and increased the costs of the judgment creditor in circumstances where if he had a clear answer to the application, he could have entered into early discussions with the judgment creditor and avoided having to respond to the proceedings at all.

[23]              Although there was no timeframe included in the directions for costs memoranda, the filing of the memorandum by the judgment debtor more than 6 months after the proceeding was discontinued is unusual.

2      Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

[24]              In the circumstances, I consider it is just and equitable for the presumption that the judgment creditor ought to pay costs to be displaced and for costs to lie where they fall.

Result

[25]              The judgment debtor’s application for costs is declined. Costs are to lie where they fall.

Associate Judge Sussock