Herbert v USAR Napier Limited - [2022] NZHC 1783

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2021-441-91

[2022] NZHC 1783

BETWEEN
MALCOLM ANDREW HERBERT

Applicant/Judgment Debtor

AND

USAR NAPIER LIMITED

Respondent/Judgment Creditor

CIV-2021-441-90

BETWEEN

USAR NAPIER LIMITED
Judgment Creditor

AND

STEPHEN PETER LUNN

Judgment Debtor

Hearing: 13 May 2022

Appearances:

D J O’Connor for Judgment Debtor in CIV-2021-441-90

J K Mahuta-Coyle for Judgment Debtor in CIV-2021-441-91 S Lowery for Judgment Creditor in both proceedings

Judgment:

22 July 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] These are applications to set side bankruptcy notices served by the judgment creditor, USAR Napier Ltd, on the judgment debtors, Stephen Peter Lunn in the 90 proceeding and Malcolm Andrew Herbert in the 91 proceeding.

[2] The judgment debts were incurred in litigation between USAR and a number of defendant parties. These included Mr Lunn and Mr Herbert in their capacities as trustees of certain trading trusts. Those trusts were involved in a major development project in Napier. In judgments dated 5 October 2021 and 4 February 2022,

HERBERT v USAR NAPIER LIMITED [2022] NZHC 1783 [22 July 2022]

Associate Judge Lester entered judgment in USAR’s favour against, inter alia,
Mr Lunn and Mr Herbert.1

[3] There is no doubt that these judgments were entered against them in their personal capacities. USAR subsequently served the bankruptcy notices dated 16 November 2021 on Mr Lunn and Mr Herbert. Mr Lunn and Mr Herbert commenced these proceedings on 7 December 2021 applying to set aside the bankruptcy notices.

[4] Those applications were set down to be heard on 13 May 2022. In the meantime, the defendant parties in the original litigation had appealed against Associate Judge Lester’s judgments and the appeal had been set down to be heard on 8 June 2022.

[5] In the days leading up to the 13 May 2022 fixture, counsel for Mr Lunn and Mr Herbert applied to vacate the fixture. Their contention was that as the appeal had been set down to be heard in the Court of Appeal, and, so it was contended, there was a reasonable prospect of this Court’s judgments being overturned, it would be wasteful of resources for these applications for orders setting aside the bankruptcy notices to be heard until the Court of Appeal’s judgment was available.

[6] In a minute dated 11 May 2022 I declined to vacate the fixture. I took the view that as the fixture had been in place for some time, all parties were prepared and ready to argue the matter and an adjournment was resisted by USAR, the most pragmatic course was to hear the matter as scheduled. At the conclusion of the hearing I indicated that I was reserving my judgment and that it might well be that the Court of Appeal’s judgment would be available before I issued mine. So it has transpired. The Court of Appeal’s judgment dismissing the appeal was delivered on 4 July 2022.2 It is therefore necessary to deal with these applications.

1 USAR…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 1783
Decision Date: 22 July 2022

CaseChat Overview and Summary

In the High Court of New Zealand, the case of Herbert v USAR Napier Limited involved applications by two judgment debtors, Stephen Peter Lunn and Malcolm Andrew Herbert, to set aside bankruptcy notices served by the judgment creditor, USAR Napier Limited. The underlying judgments were issued against Lunn and Herbert in their personal capacities for debts arising from litigation involving a major development project in Napier. Lunn and Herbert sought to set aside the bankruptcy notices, arguing that they were not personally liable for the debts due to their roles as trustees of certain trading trusts.

The primary legal issues addressed by the court were whether the bankruptcy notices could be set aside on the basis that the judgment debtors were not personally liable for the debts. This turned on the interpretation of the settlement agreement and whether it limited the personal liability of the judgment debtors. The court considered whether there was a procedural or substantive flaw in the original judgments that could justify setting aside the bankruptcy notices. It also examined whether the judgment debtors had raised their defences at the appropriate time and whether they had a reasonable prospect of success in their applications.

The court found that the argument regarding personal liability was not a valid basis for setting aside the bankruptcy notices. The court held that Lunn's argument, which was not raised in the original litigation or on appeal, was not a proper basis for challenging the underlying judgment. The email from Lunn’s solicitors, which suggested he was signing on behalf of the trust, did not exclude personal liability but rather indicated an intent to limit such liability to the assets of the trust. The court also dismissed Herbert’s application, as his cross claim had been rejected by the lower court and the appeal court had dismissed his appeal.

The court concluded that both applications were without merit and dismissed them. The judgment creditor was provisionally awarded costs on a 2B basis, with the possibility for the judgment debtors or the creditor to contest the costs within a specified period.

Orders