Gibson v Official Assignee of New Zealand

[2015] NZHC 3200

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-429 [2015] NZHC 3200

UNDER

the Insolvency Act 2006, s 226

IN THE MATTER OF

a decision of the Official Assignee of New
Zealand dated 16 February 2015

BETWEEN

NEVILLE JAMES GIBSON Appellant

AND

THE OFFICIAL ASSIGNEE OF NEW ZEALAND

Respondent

Hearing:

28 August 2015 and further submissions in writing on 1

September 2015

Appearances:

Appellant in person
G Neil and P Shackleton for the Respondent

Judgment:

15 December 2015

JUDGMENT OF WOODHOUSE J (Costs)

This judgment was delivered by me on 15 December2015 at 1:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Parties/Solicitors:

Mr N J Gibson, Sydney, NSW, Australia

G Neil and P Shackleton, Meredith Connell, Office of the Crown Solicitor, Auckland

GIBSON v THE OFFICIAL ASSIGNEE OF NEW ZEALAND [2015] NZHC 3200 [15 December 2015]

[1]      Mr Gibson was adjudicated bankrupt on 24 November 2010.   On 9 March

2015 he appealed against a decision made by the Official Assignee not to intervene in a proceeding Mr Gibson had commenced in the New South Wales Supreme Court. He appealed under s 226 of the Insolvency Act 2006 (the Act).  He then discontinued the appeal.

[2]      The Official Assignee seeks  costs pursuant to  r 15.23 of the High Court

Rules, which is as follows:

15.23   Costs

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[3]      As is apparent from the rule, the respondent has a prima facie entitlement to costs.  The application was opposed by Mr Gibson on a number of grounds which I will deal with in the following paragraphs.

[4]      Mr Gibson argued that costs orders for failed appeals under s 226 would not have been contemplated by Parliament.   I disagree.   An appeal under s 226 is an appeal like any other.  It is usually a general appeal that is heard de novo.1   There is no reason to think that s 226 appeals are not covered by the costs regime in the High Court Rules.  As a general rule costs against the appellant are available under s 226, and have been awarded.2

[5]      Mr Gibson’s next point was that any liability for costs would rest with the Official Assignee anyway, because of the operation of s 101.   In other words he submitted that the costs will be a debt which will be distributed out of his property vested in the Official Assignee.  The assumption from this is that the costs would be a provable debt, would be distributed out of the bankrupt’s estate, and therefore that

a  costs  order  would  be  pointless.    Mr  Gibson  cited  De  Alwis  v  Luvit  Foods

1      Section 226(4).  Murray v Official Assignee HC Hamilton B 318/92, 9 September 1992 at 9-10;

Edmonds Judd v Hobbs [2000] 2 NZLR 135 (CA) at [30].

2      Holdgate v Official Assignee HC Auckland B 1545/96, 22 May 201 at [87]; Miah v Official

Assignee [2013] NZHC 2726 at [127].

International in support of his argument.3    He also submitted that this is supported by Bradbury  v Commissioner  of  Inland  Revenue,4   in  which  the  Supreme Court followed Re Nortel GmbH.5

[6]      The answer to this is that any costs award is not a debt that will be payable from the proceeds of Mr Gibson’s estate.   It is not a provable debt. Section 232 provides that a provable debt is a debt or liability that the bankrupt owes at the time of adjudication,  or  after  the adjudication  but  before  discharge,  by reason  of an obligation incurred by the bankrupt before adjudication.   If costs are awarded on discontinuance of the appeal they will not be a provable debt on either basis.  This is what distinguishes this case from Bradbury and the United Kingdom Supreme Court

decision in Re Nortel GmbH.6

[7]      Bradbury held that costs are provable if the order is made in proceedings commenced before adjudication, overruling High Court decisions to the contrary.7   In Re Nortel GmbH, Lord Neuberger said:8

…by becoming a party to legal proceedings in this jurisdiction, a person is brought within a system governed by rules of court, which carry with them the potential for being rendered legally liable for costs, subject of course to the discretion of the court.

[8]      This is consistent with the definition in s 232: a debt is provable if it accrues after the adjudication, but before the discharge, by reason of an obligation incurred by the bankrupt before adjudication.  Here, the proceedings were commenced after adjudication.   Indeed, Mr Gibson appealed a decision by the Official Assignee in administering his bankrupt estate.   Mr Gibson noted that the Court in Bradbury granted leave under s 76(2) to permit continuation of applications for costs.  This is

of no consequence to the present case.   That section is concerned with leave to

3      De Alwis v Luvit Foods International HC Auckland CIV-2002-404-001944, 24 March 2010.

4      Bradbury v Commissioner of Inland Revenue [2015] NZSC 80, [2015] 1 NZLR 739.

5      Re Nortel Gmbh [2003] UKSC 52, [2014] AC 209.

6      And  from s  270: “A person  who  obtained an  order for costs against the  bankrupt before

adjudication may prove for the amount of the costs when the costs are fixed, even if the amount

is fixed only after adjudication”.

7      Kaye v Auckland District Law Society [1998] 1 NZLR 151 (HC) at 158; Re Auckland Council, ex parte Mawhinney [2014] NZHC 297.

8      Re Nortel GmbH, above n 5, at [89]. See also BPE Solicitors v Gabriel [2015] UKSC 39, [2015]

3 WLR 1 at [13].

continue proceedings commenced before the date of adjudication.   It has no application to this case.

[9]      The effect of this is that any costs order would not be a provable debt and the property vested in the Official Assignee would not be distributed to settle that debt.9

Moreover, upon discharge under s 304, the liability in costs would not be released, and the Official Assignee could pursue Mr Gibson at that stage for the costs of this proceeding.   I therefore consider that imposing costs is not inconsistent with the operation of s 101 of the Insolvency Act.

[10]     De Alwis  is  also  not  relevant.10      That  case  concerned  the  standing  of  a bankrupt to bring an application to set aside a judgment entered against the bankrupt, and its interaction with the principle that a bankrupt cannot in the bankrupt’s own name appeal against a judgment which is enforceable only against the estate vested in the bankrupt’s trustee.

[11]     It also is not relevant that because of the bankruptcy Mr Gibson may not have the  money  to  pay  the  costs  order.    The  Official Assignee  can  wait  until  after discharge to pursue the costs.  Mr Gibson is also not bankrupt in Australia, where he is based.

[12]     The next point is that Mr Gibson argues that he should not be liable for costs where discontinuing the proceeding was a prudent step taken because he could not obtain legal aid.  This is not enough to displace the presumption under r 15.23.  In his memorandum filed with his notice of discontinuance Mr Gibson said he discontinued because the appeal had lost its purpose, as he was no longer taking steps to protect and pursue the property in Australia.  It is just and equitable in these circumstances for Mr Gibson to pay the Official Assignee’s costs incurred in responding to this now abandoned appeal.

[13]     Mr Gibson also challenges quantum.  The respondent sought scale costs on a

2B basis.  The challenge is to three items where the costs are based on 0.4 of the

9      See ss 233 and 274.

10     De Alwis v Luvit Foods International, above n 3.

daily rate and Mr Gibson submits that the allowance should be 0.2.   These three items are in accordance with, or analogous to, time allocations specified in Schedule

3 and are appropriate.

[14]     There  is  one  other  quantum  point.     The  respondent  filed  a  further memorandum  in  response to  Mr Gibson’s  memorandum,  setting out  grounds  in opposition, but also seeking a further award of costs for 0.4 of the daily rate in respect of the application for costs and what was submitted to be unnecessary opposition. There are decisions finding it inappropriate to award costs in respect of a costs  application  itself,  or  expressing  reservations.11     There  are  numbers  of

authorities the other way.12    Costs are a matter of discretion.  I am satisfied that in

this case the respondent is entitled to additional costs of $796 for costs in respect of the dispute over costs.   And I note that that sum is in fact less than the strict entitlement because that final step in the proceeding was taken after the daily rate was increased to $2,230.

[15]     There is accordingly an order that the appellant pay the respondent’s costs in

a sum of $4,179.

Woodhouse J

11     West v Cowley [2013] NZHC 2356 at [28]. Delegat v Norman [2014] NZHC 1099 at [33];

Horton v Cowley [2014] NZHC 968 at [8]; Young v Television New Zealand Ltd [2012] NZHC
3460 at [15]; Bonney v Cottle [2012] NZHC 2195 at [33]; Jeffreys v Morgenstern [2013] NZHC

1361 at [40]; Jordan v O’Sullivan (No 2) HC Wellington CIV-2004-485-002611, 1 May 2009 at

[16].

12     Beach Road Preservation Society v Whangarei District Council (2001) 16 PRNZ 13 (HC) at [15]; Auckland Regional Council v Arrigato Investments (2002) 16 PRNZ 217 (HC) at [21]; Parsot v Greig Developments Ltd (2008) 18 PRNZ 995 (HC) at [23]; Body Corporate Administration Ltd v Mehta (No 4) [2013] NZHC 213 at [85].