FM Custodians Limited v Kooiman
[2019] NZHC 2955
•13 November 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2017-485-671
[2019] NZHC 2955
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Michael Edwin Kooiman
BETWEEN
FM CUSTODIANS LIMITED
Judgment Creditor
AND
MICHAEL EDWIN KOOIMAN
Judgment Debtor
AND
KEVIN JOHN WHITLEY in his capacity as the receiver of Ribble Limited (in rec) Supporting Creditor
Hearing: 21 October 2019 Appearances:
S D Munro and A L Davidson for judgment creditor Judgment debtor in person
R B Tucker for supporting creditor
Judgment:
13 November 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
This judgment was delivered by me on 13 November 2019 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: 13 November 2019
FM CUSTODIANS LIMITED v KOOIMAN [2019] NZHC 2955 [14 November 2019]
[1] This is an application by the judgment creditor, FM Custodians Ltd, for an order pursuant to s 11 of the Insolvency Act 2006 adjudicating the judgment debtor, Mr Michael Kooiman, bankrupt. FM Custodians’ application is supported by Mr Kevin Whitley, the receiver of a company by the name of Ribble Ltd, formerly Ground Support (Wgtn No. 1) Ltd. It is opposed by Mr Kooiman.
[2] On 19 March 2013, FM Custodians and Ribble entered into an agreement whereby FM Custodians agreed to lend and Ribble agreed to borrow certain monies to enable the latter to acquire two sections in Ribble Street, Island Bay, Wellington. Ribble was a developer and was proposing to develop the sections. The same day, various security arrangements were put in place; a mortgage over the two sections, a general security agreement and a guarantee of Ribble’s obligations by Mr Kooiman.
[3] Ribble defaulted on its obligations under the loan and Mr Kooiman defaulted on his obligations under the guarantee.
[4] Pursuant to the general security agreement, by deed of appointment dated 5 December 2016, FM Custodians appointed Mr Whitley as receiver over Ribble’s property secured under the same.
[5] Pursuant to the guarantee, on 13 April 2017 FM Custodians commenced proceedings against Mr Kooiman and applied for summary judgment. Mr Kooiman opposed this. The application was heard on 24 July 2017. Associate Judge Smith issued a judgment granting FM Custodians summary judgment against Mr Kooiman in the sum of $930,103.90 on 31 July 2017.1 It is this judgment upon which FM Custodians relies in this bankruptcy proceeding.
[6] FM Custodians served a bankruptcy notice dated 17 August 2017 on Mr Kooiman on 24 August 2017.
[7] By originating application dated 7 September 2017, Mr Kooiman applied to set aside the bankruptcy notice. This application was opposed by FM Custodians. It
1 FM Custodians Ltd v Kooiman [2017] NZHC 1783.
was heard on 5 February 2018. Associate Judge Smith issued a judgment dated 16 February 2018 dismissing the application.2
[8] On 19 March 2018, FM Custodians commenced this proceeding by filing and serving an application for the order described above.
[9] Mr Kooiman appealed from Associate Judge Smith’s judgment dismissing his application for an order setting aside the bankruptcy notice. On 1 April 2019, the Court of Appeal dismissed his appeal.3 The Court ordered him to pay indemnity costs.
[10] Mr Kooiman then sought leave to appeal from the Court of Appeal’s decision. In a judgment issued on 22 July 2019, the Supreme Court declined his application for leave.4 The Supreme Court too ordered Mr Kooiman to pay costs.
[11] Mr Kooiman’s appeal to the Court of Appeal and subsequent application for leave to appeal to the Supreme Court necessarily delayed FM Custodians’ proceeding in this Court. However, upon the Supreme Court declining Mr Kooiman’s application for leave, this proceeding was set down for hearing.
[12] FM Custodians has complied with the formal requirements of pt 2 of the Insolvency Act and pt 24 of the High Court Rules 2016 in relation to this application. Mr Kooiman does not contend otherwise. Prima facie then, the company is entitled to the order it seeks for Mr Kooiman’s adjudication in bankruptcy.
[13] Thus, the issue for determination resolves itself into whether Mr Kooiman is able to establish that it would not be just and equitable to make an order adjudicating him bankrupt,5 or whether there are any grounds upon which to make an order halting the proceeding.6
2 Kooiman v FM Custodians Ltd [2018] NZHC 176.
3 Kooiman v FM Custodians Ltd [2019] NZCA 76.
4 Kooiman v FM Custodians Ltd [2019] NZSC 77.
5 Insolvency Act 2006, s 37(c).
6 Section 38.
[14] In his notice of opposition dated 17 September 2019, Mr Kooiman articulated the bases upon which he proposed to oppose the order sought. I set out paragraph 3 in full:
3.a Upon the grounds set out in the affidavit of Michael Edwin Kooiman in support of this notice; and
3.b Upon the grounds that the Judgment Creditor appointed Mr Whitley as receiver of Ribble Limited (the Receiver) pursuant to the terms of the General Security Agreement dated 19 March 2013 and Mortgage Number 9345866.2 and that the Receiver has converted the Judgment Debtor’s control of the company’s real property of Ribble Limited causing loss and damages to the Judgment Debtor and the Mortgagor.
3.c Upon the grounds that the Judgment Creditor has aided and abetted the Receiver in his conversion of the real property of Ribble Limited causing loss and damage to the Judgment Debtor and the Mortgagor.
3.d Upon the grounds that the Judgment Creditor as mortgagee and the Receiver have caused wastage in respect of dealing with the real property of Ribble Limited causing loss and damage to the Judgment Debtor and the Mortgagor.
3.e Upon the grounds that the Judgment Creditor has by its wastage and the wastage of its appointed receiver deprived the Judgment Debtor of his right to redeem the mortgage pursuant to s 97 of the Property Law Act 2007 in that they added costs not attributable to the mortgage to the redemption sum causing loss and damage to the Judgment Debtor and the Mortgagor.
3.f Upon the grounds that the Judgment Debtor has unlawfully consolidated costs and expenses of the GSA into the mortgage, those costs causing loss and damage to the Judgment Debtor and the Mortgagor.
3.g Upon the grounds that the Judgment Debtor has paid the costs and expenses of the Receiver for matter that are outside the terms of the deed of appointment the Receiver was appointed under causing loss and damage to the Judgment Debtor and the Mortgagor.
3.h Upon the grounds that the Receiver has charged costs to the receivership which are not attributable to the property in receivership and those costs, unlawfully adding to the mortgage debt, causing loss and damage to the Judgment Debtor and Mortgagor.
3.i Upon the grounds the Judgment Creditor has allowed the Receiver to undertake action on the Mortgagee’s behalf that was not within the terms of the Memorandum of Mortgage Number 2007/4238 causing loss and damage to the Judgment Debtor and the Mortgagor.
3.j Upon the grounds that the Receiver has not realised any personal or other property of Ribble Limited in the approximate 3 year period of his appointment since 5 December 2016.
3.k7 Upon the grounds that the Receiver is barred from being the Receiver of Ribble Limited by virtue of s 5(b) of the Receivership Act 1993 and his actions have and continue to cause loss and damage to the Judgment Debtor and the Mortgagor.
3.m Upon the grounds that the Judgment Creditor has allowed interest, penalty interest, collection costs to be charged against the mortgage whilst aiding and abetting the Receiver in his unlawful control of the real property of Ribble Limited causing loss and damage to the Judgment Debtor and the Mortgagor.
3.n Upon the grounds that the Judgment Creditor retains security for the debt claimed by way of registered mortgage over Ribble Limited’s real property at 44 and 46 Ribble Street, Wellington, and a general security agreement over the personal property of Ribble Limited.
3.o Upon the grounds that the Judgment Debtor believes the adjustments to the debt due and realisation of property will exceed any amount of debt that would be owed to the Judgment Creditor following determination of the matters raised above.
3.p Upon the grounds that if required the Judgment Debtor has the capacity to refinance the mortgage debt if the debt did not contain costs not attributable to the mortgage.
3.q Upon the grounds that the judgment Debtor has a debt of $34,027.55 owed to the Judgment Debtor by Ribble Limited that can be offset against the claim of the supporting Creditor, in this proceeding.
3.r Upon the grounds that the Receiver has refused to provide the accounts and financial books of Ribble Limited to the Judgment Debtor as director of Ribble Limited which affects the Mortgagor and Judgment Debtor’s ability to refinance the mortgage debt of Ribble Limited and redeem the mortgage within the current legal structure.
3.s The Judgment Debtor seeks a halt order in respect of these proceedings until the matters raised above are finally determined.
3.t The halt order is sought on the basis it would not be just or equitable to allow the Judgment Creditor to enforce the decision until the Judgment Debtor’s appeal has been finally determined.
[15]In his written submissions Mr Kooiman refined his arguments considerably:
1.6The judgment debtor seeks a halt order halting the judgment creditor’s application for adjudication of the judgment debtor until the following matters have been determined:
a.A declaratory judgment in respect of the powers of the receiver as they relate to the control of the real property (“land”) of Ribble.
7 The nomenclature in Mr Kooiman’s notice of opposition is inaccurate in that there is no sub-paragraph 3.l.
b.Even if the Court decides that the receiver had the right to take the action that he did in respect of the land of Ribble, there is a legitimate argument that the mortgagee has not complied with its fiduciary duty to keep the costs in respect of the sale of the land of Ribble to a minimum.
c.What costs have been unreasonably charged to the mortgage and are to be excluded from the redemption figure. It is the judgment debtor’s position that any amount unreasonably applied to the account of the mortgage has deprived the judgment debtor of the ability to redeem for value.
d.In the alternative of b. and c. above, if “a.” is determined in favour of the director’s control of the land of Ribble, then the Court will need to make a determination in respect of the losses suffered by the judgment debtor and/or Ribble which must be deducted from the judgment debt and the value to the remaining security held by FMC in arriving at a determination as to whether the judgment debtor has an outstanding debt to the receiver or FMC or the opposite applies.
It is the judgment debtor’s position that either way, the judgment debtor has a legitimate claim that can be pursued and has a solid foundation in the documents supporting this opposition.
[16] Before addressing the arguments advanced by Mr Kooiman, it may be useful to record one additional aspect of the background. Since this bankruptcy proceeding was commenced, there has been related litigation between Ribble and a company by the name of Eastlight Asset Trading No. 5 Ltd. The principal issue in this proceeding concerned the scope of the general security agreement granted by Ribble to FM Custodians, particularly whether it extended to the two sections on Ribble Street, and consequentially whether Mr Kooiman, as the director of Ribble, or the receiver appointed by FM Custodians was entitled to deal with those properties. Mr Kooiman purported to enter into a sale and purchase agreement on behalf of Ribble with Eastlight pursuant to which Ribble agreed to sell and Eastlight agreed to buy the sections. Mr Kooiman owns or controls the shares of both companies, and is the sole director of both. He signed the sale and purchase agreement on behalf of both companies.
[17] On the strength of that sale and purchase agreement, Eastlight registered a caveat over the titles to the properties. When the receiver took steps to remove the caveat so that he could deal with them, Eastlight sought an order sustaining the caveat. In a judgment dated 4 October 2019, I concluded that the general security agreement
extended to all Ribble’s property, including its real property, being the two sections, so that the receiver was entitled to deal with them and that the sale and purchase agreement between Ribble and Eastlight was a nullity.8 The Eastlight litigation it was also alleged that FM Custodians was responsible for excessive charging on the part of Mr Whitley that, it was argued, had unjustifiably inflated the debts owed to FM Custodians by Ribble and Mr Kooiman and effectively prevented the former from being able to redeem the mortgage over the two sections. I am informed that my judgment is the subject of an appeal. However, it has not been stayed.
[18] Returning to Mr Kooiman’s summary of his arguments quoted at [15], it will be apparent that he advances his case for an order halting this proceeding on two bases:
(a)His first contention is that FM Custodians’ appointment of Mr Whitley as receiver over Ribble did not confer on him any entitlement to deal with the company’s real property and in particular the two sections. This, Mr Kooiman contends, follows from various provisions of the Property Law Act 2007, the Land Transfer Act 2017, the Personal Property Securities Act 1999, the Receiverships Act 1993 and most importantly from the terms of the general security agreement under which, and the deed of appointment pursuant to which, FM Custodians appointed Mr Whitley. These are the arguments identified at paragraph 1.6 (a) and (d), quoted at [15].
(b)Second, Mr Kooiman says that even if FM Custodians’ appointment of Mr Whitley did confer on him authority to deal with Ribble’s real property, he has overcharged for his services and this has inflated the amount of FM Custodians’ claim against Ribble and him, which gives rise to an unquantified counterclaim by him against FM Custodians to which the Court should have regard. These are the arguments identified at paragraph 1.6(b) and (c), quoted at [15].
8 Eastlight Asset Trading No. 5 Ltd v Ground Support (Wgtn No. 1) Ltd [2019] NZHC 2534.
[19] On those bases, Mr Kooiman submits that the Court should make an order halting this proceeding so that his two contentions can be litigated in new proceedings of the sort he foreshadows in his submissions.
[20] Both Mr Munro for FM Custodians and Mr Hucker for Mr Whitley submitted that Mr Kooiman is precluded from advancing those arguments in this proceeding, and would also be precluded from advancing them in other proceedings.
[21] It is an elementary principle of the common law that a party to litigation who is dissatisfied with the outcome cannot re-litigate the same matter in the hope of doing better the second time.9 The underlying principle is that there should be an end to litigation and that, accordingly, a final judgment of a court of competent jurisdiction is conclusive as to the issues between the parties to that litigation. Of course, there are circumstances in which a party may apply for an order setting aside a judgment (for example where the judgment has been obtained by fraud), and, from a first instance judgment, there will invariably be at least one right of appeal. But, otherwise, once a court of competent jurisdiction has decided a case, the parties must accept the outcome.
[22] A related principle, captured in r 15.1 of the High Court Rules, is that the Court will strike out a pleading, or aspect of a pleading, that constitutes an abuse of process. It has long been held that any attempt to re-litigate issues that have already been concluded constitutes such an abuse.10
[23] In my judgement, on the proper application of those principles here, Mr Kooiman is precluded from pursuing, in this case or in further litigation, the arguments summarised earlier, which he contends would justify the Court halting this proceeding.
[24] In FM Custodians’ original proceeding against Mr Kooiman, in which it sought summary judgment, Mr Kooiman’s notice of opposition dated 30 May 2017 levelled a series of criticisms at FM Custodians relating to the appointment of Mr Whitley. It
9 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 at [28].
10 Beattie v Premier Events Group Ltd [2014] NZCA 184, [2015] NZAR 1413.
is fair to say that these criticisms were comparatively general, the primary accusation being that FM Custodians’ appointment of Mr Whitley was unlawful or unjustified and had resulted in the “conversion” of Ribble by FM Custodians.
[25] In Mr Kooiman’s application for an order setting aside FM Custodians’ bankruptcy notice, his originating application dated 7 September 2017 reveals a shift of focus from the unlawfulness of FM Custodians’ appointment of Mr Whitley to the scope of that appointment.
[26] By the time of the Eastlight proceeding, the argument that Mr Kooiman now says he wishes to advance relating to the scope of the general security agreement and whether or not it extended to the two sections was fully developed. In my assessment, the argument advanced on Eastlight’s behalf in that proceeding was, in both its formulation and in substance, precisely the same argument as Mr Kooiman advanced in support of his application for an order halting this proceeding and that he says he wishes to advance in further proceedings.
[27] As already said, Mr Kooiman’s second contention is that even if FM Custodians’ general security agreement extends to the sections, the receiver’s costs, for which Ribble and Mr Kooiman are said to be liable, are excessive. It is fair to say that this contention was raised in all three of the earlier proceedings.
[28] It is true that the parties in the Eastlight proceeding were Eastlight and Ribble, and therefore not the same as the parties here (FM Custodians and Mr Kooiman). However, the principles I have described apply not only to the parties but to their privies.11 In the Eastlight proceeding it will be recalled that Eastlight was owned by a company connected with Mr Kooiman and that Mr Kooiman was its director. It was Mr Kooiman who signed the relevant sale and purchase agreements on the company’s behalf (and on behalf of Ribble). In my view, there is a complete coincidence of interests between Mr Kooiman and Eastlight.
[29] It is also true that the issue concerning the receiver’s costs has not been the subject of express determination in any of the earlier proceedings. But that is because
11 Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 268.
at the relevant hearings Mr Kooiman abandoned these arguments in favour of what he or his advisers obviously regarded as stronger points. The law is clear that the principles precluding a party from re-litigating issues apply to issues which can and should have been advanced in earlier litigation.12 For example, there are numerous cases in which courts have declined to entertain an argument that was not advanced in earlier proceedings because of a failure on the part of the party concerned to ascertain that the argument was open to him, her or it when with reasonable diligence that could have been ascertained.13 This case is an example in which the party concerned — Mr Kooiman — was demonstrably aware of the availability of the argument, having raised it in the relevant pleading in each case, and elected to abandon it.
[30] In short, my judgement is that Mr Kooiman is not entitled to raise a claim of the sort foreshadowed in his submissions in order to derail FM Custodians’ application.
[31] I would dismiss Mr Kooiman’s application for an order halting this proceeding on that basis alone.
[32] In the course of argument, Mr Munro and Mr Hucker addressed the merits of both limbs of Mr Kooiman’s argument.
[33] I do not propose to address the merits of the first argument. I would dismiss Mr Kooiman’s argument in relation to the respective rights of Ribble (and Mr Kooiman) and the receiver for the reasons contained in my judgment dated 4 October 2019 in the Eastlight proceeding.
[34] The view I have reached is that any claim by Mr Kooiman in relation to the receiver’s costs and expenses would have very low prospects of success.
[35] There are several reasons for this, and I propose to do no more than highlight the keys ones:
12 Beattie v Premier Events Group Ltd, above n 10, at [45].
13 See, for example, Whitford Properties Ltd (in liq) v Coumat Ltd [2019] NZHC 1001; Walker v Nelson District Court [2018] NZHC 1967, [2018] NZAR 1454; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434.
(a)For a start, as Mr Munro submitted, there is a sense in which this proposed claim is simply a repetition of the first. What it appears Mr Kooiman wishes to argue is that, because FM Custodians’ appointment of Mr Whitley as a receiver was pursuant to the general security agreement, it did not extend to that company’s real assets, meaning any costs and expenses attributable to the administration of the two sections are not chargeable to Ribble or him. To the extent that the first limb of the argument is repeated in this second limb, I have already dealt with it.
(b)Whilst Mr Kooiman asserts that the receiver’s costs and expenses are unjustifiable, he has not identified with any precision the costs and expenses involved (except to the extent of making it clear that they are those relating to the administration of the two sections), and nor has he quantified the amount of the proposed claim.
(c)Both in terms of s 6(3) of the Receivership Act and in terms of cl 25(b) of the general security agreement in this case, FM Custodians does not have an agency relationship with Mr Whitley. It is Ribble that is Mr Whitley’s principal. It follows that any claim by Mr Kooiman would be directed at Ribble and Mr Whitley. That being so, it is difficult to see how any such claim, even if it were successful, would allow Mr Kooiman to establish an entitlement to set off that amount against FM Custodians’ judgment debt on which it relies in this proceeding.
[36] For those reasons, Mr Kooiman has, in my view, failed to establish even an arguable case, much less a prima facie case, on which he might rely in asking the Court to exercise its discretion to order a halt to this proceeding.
[37] There is a third element to this case, emphasised by Mr Munro in his submissions. He referred me to this Court’s judgment in Eide v Colonial Mutual Life
Assurance Society Ltd, where Master Faire referred to the public interest component in insolvency proceedings and in particular said:14
In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public”.
[38]Mr Munro went on to submit that:
Mr Kooiman has commenced meritless proceedings, both to set aside the Bankruptcy Notice, and to appeal decisions by the High Court and the Court of Appeal dismissing the application to set aside the Bankruptcy Notice. FMC submits that these proceedings have significantly increased the costs incurred by FMC and have caused significant unjustified delays. Counsel submit that it would be appropriate and in the wider public interest, to prevent any further abuses of court processes by Mr Kooiman.
[39] Mr Munro also relied on this Court’s judgment in Darby v Official Assignee, which further emphasised the public interest component of insolvency proceedings and in particular emphasised that part of that public interest was the Court’s responsibility to ensure that where there is evidence of a party defaulting on his or her responsibilities there are appropriate consequences or accountability.15
[40] He also referred to this Court’s judgment in Re Coll, ex parte Consumer Finance Ltd, where Master Kennedy-Grant placed particular emphasis on the Court’s role in ensuring a proper response to public interest considerations in the case of guarantees.16 For myself, I would not have thought that there is any need for a gradation of financial responsibilities. Part of the Court’s role in dealing with insolvency matters is to ensure — in the public interest — that the courts deal appropriately with all categories of financial obligations.
[41] Mr Munro submitted that it is in the interests of commercial morality that Mr Kooiman be held accountable for his obligations under the guarantee and that it is just and equitable that an order be made adjudicating him bankrupt. I agree.
14 Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (HC) at 635, quoting
Re Nisbett, ex parte Vala [1934] GLR 553 at 556.
15 Darby v Official Assignee [2013] NZHC 22 at [14].
16 Re Coll, ex parte Consumer Finance Ltd HC Rotorua B69/97 18 September 1997.
[42] Ribble, Mr Kooiman and FM Custodians entered into these contractual arrangements in March 2013. By March 2015, both Ribble and Mr Kooiman were in breach of their obligations. FM Custodians sued Mr Kooiman and obtained a summary judgment for a large amount of money — $930,103.90 — in July 2017. Mr Kooiman has delayed the progress of the proceedings against him at every turn by unsuccessfully defending FM Custodians’ summary judgment application; unsuccessfully challenging the legitimacy of FM Custodians’ bankruptcy notice in this Court, the Court of Appeal and the Supreme Court, and, in the way described above, through his company, Eastlight, litigating the issue of the scope of the general security agreement.
[43] Now he comes back to the Court to oppose FM Custodians’ application for an order for his adjudication in bankruptcy and, in doing so, asks to be given the opportunity to commence or facilitate the commencement of yet further proceedings to raise essentially the same arguments that have been available to him in the earlier proceedings.
[44]I can see no merit in Mr Kooiman’s position.
[45] As I am invited to do by Mr Munro on behalf of FM Custodians, I make an order pursuant to s 11 of the Insolvency Act adjudicating Mr Kooiman bankrupt. That order will come into effect on the date and at the time noted on the cover sheet to this judgment.
[46] I reserve costs as I have not heard from the parties in relation to these. If the Official Assignee and counsel are unable to agree on costs, they may come back to the Court by memoranda in the usual way and I will deal with them on the papers.
Associate Judge Johnston
Solicitors:
Anderson Lloyd, Christchurch for judgment creditor Hucker & Associates, Auckland for supporting creditor
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