Jarden Securities Limited (formerly OM Financial Limited) v Jindal
[2021] NZHC 2215
•27 August 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-002546
[2021] NZHC 2215
BETWEEN JARDEN SECURITIES LIMITED (formerly OM FINANCIAL LIMITED)
Judgment CreditorAND
GAUTAM JINDAL
Judgment Debtor
Hearing: 22 June 2021 Appearances:
J Spring for the Judgment Creditor Judgment Debtor in Person
Judgment:
27 August 2021
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 27 August 2021 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Minter Ellison Rudd Watts, Auckland Copy to:
G Jindal, Auckland
JARDEN SECURITIES LTD v JINDAL [2021] NZHC 2215 [27 August 2021]
Introduction
[1] Jarden Securities Ltd, its predecessor OM Financial Ltd and Mr Jindal have been involved in a legal dispute since 2016.1 Their disagreement began with Mr Jindal claiming that OM Financial Ltd, a financial broker, caused him financial losses when he was their customer. Mr Jindal sought non-party discovery from the NZX, in its capacity as regulator. Mr Jindal objected to NZX’s choice of counsel. He has pursued that objection to the Court of Appeal. Through a series of decisions, he has been informed that his objection has no place in the proceedings between him and Jarden. Despite that, he has persisted, and in this proceeding faced bankruptcy for failing to pay costs awards arising out of his failed applications.
[2] At the eleventh hour, Mr Jindal paid the outstanding costs awards owed to Jarden. Jarden asks that Mr Jindal be adjudicated bankrupt despite this payment. Jarden also asks for increased costs or at least scale costs on a 2B basis.
[3]The issues I need to decide are:
(a)Should Mr Jindal be adjudicated bankrupt despite having paid the costs awards?
(b)Should Mr Jindal pay costs and if so, how much?
[4] Before addressing these issues, I will describe the procedural background up to the hearing of this application, the arguments made at the hearing, and what happened afterwards.
Procedural background
[5] Mr Jindal was a customer of Jarden. In 2016, he filed proceedings against Jarden, which he then withdrew. In proceedings issued in December 2018, he claimed that Jarden negligently and in breach of contract caused him financial losses. Jarden
1OM Financial Ltd and Jarden Securities Ltd amalgamated on 7 March 2021 to become Jarden Securities Ltd. In this judgment I generally refer to both OM Financial Ltd and Jarden Securities Ltd as “Jarden”.
applied for security for costs. Judge G M Harrison granted the application on 22 October 2019, ordering Mr Jindal to pay $4,000 as part security for costs.
[6] Mr Jindal then sought non-party discovery against NZX Ltd, the operator of the New Zealand Stock Exchange with a regulatory function in respect of Jarden. For the purposes of the non-party discovery application, NZX sought to instruct Minter Ellison Rudd Watts (Minters) as its solicitors. Minters also acted for Jarden. Mr Jindal applied to disqualify Minters from acting for both Jarden and NZX. Jarden applied for further security for costs. On 12 February 2020, Judge Harrison dismissed Mr Jindal’s application, awarded Jarden costs of $4,387.50 and ordered Mr Jindal to pay a further $21,000 as security for costs by 10 April 2020.2 The proceedings were directed to be stayed until the additional security was provided.
[7] On 4 May 2020, Mr Jindal sought to appeal both parts of Judge Harrison’s 12 February 2020 decision in the High Court, some eight weeks out of time. On 7 August 2020, Justice Powell declined to grant an extension of time to file the appeal.3 His reasons were that Mr Jindal had elected earlier not to file an appeal; and the appeal was in any case without merit. Justice Powell awarded Jarden and NZX costs against Mr Jindal on 18 September 2020 ($5,000 each in costs as well as disbursements).4
[8] Mr Jindal sought to appeal Justice Powell’s decision of 7 August and filed an application for leave to appeal in the High Court. By minute, dated 15 September, Justice Powell advised Mr Jindal that if he wished to appeal, he needed to file directly with the Court of Appeal and to withdraw his present application in the High Court. Mr Jindal did not withdraw his application for leave until 29 October 2020. Justice Powell was satisfied that, by not immediately withdrawing his application, Mr Jindal put Jarden, NZX and Minters to further costs, and awarded costs ($1,434) and disbursements ($110) against Mr Jindal on 20 November 2020.5
2 Jindal v OM Financial Ltd [2020] NZDC 2162.
3 Jindal v OM Financial Ltd [2020] NZHC 1993.
4 Jindal v OM Financial Ltd [2020] NZHC 2444.
5 Jindal v OM Financial [2020] NZHC 3067.
[9] On 20 October 2020, Mr Jindal filed a defective notice of appeal in the Court of Appeal. He filed an amended notice of appeal on 19 November 2020, as well as an application for leave to adduce further evidence.
[10] On 19 January 2021, Jarden served a bankruptcy notice on Mr Jindal, demanding payment of the three costs orders described, a total of $11,070.63.
[11] Mr Jindal applied to the Court of Appeal for a dispensation of the requirement to pay security for costs on 29 January 2021, and for an extension of time to file the case on appeal on 5 February 2021. The Deputy Registrar on 10 February 2021 suspended the application of r 43 (the rule requiring an application for a hearing date for the case on appeal to be filed by 19 February), pending a decision on Mr Jindal’s legal aid application. A grant of legal aid usually means that the requirement for security for costs is dispensed with.
[12] Mr Jindal did not meet the bankruptcy notice served by Jarden. On 10 March 2021, Jarden served Mr Jindal with an application to adjudicate him bankrupt.
[13] Mr Jindal filed a notice of opposition, claiming the judgments underlying the bankruptcy notice were being appealed to the Court of Appeal.
The hearing
[14] The hearing of Jarden’s application for adjudication took place on 22 June 2021. In his notice of opposition, Mr Jindal asked the Court to refuse to adjudicate him bankrupt under ss 37(c), 37(d) or 42 of the Insolvency Act 2006, or to halt the bankruptcy proceedings under ss 38 or 42, because of his intended appeal(s).
[15]For context, I will explain how these provisions operate.
[16] The Court may, in its discretion, refuse to adjudicate a debtor bankrupt under s 37 if it is just and equitable (s 37(c)) or for any other reason (s 37(d)). The Court also has a general discretion under s 38 of the Act to halt an application for adjudication; and a discretion pursuant to s 42 to halt or refuse an adjudication when
the judgment underlying the bankruptcy notice is under appeal. The debtor bears the onus of persuading the Court that the discretion should be exercised.6
[17] The discretion provided for in s 38 is flexible and not subject to fixed rules.7 The Court has granted halts under this provision to enable a debtor to try to demonstrate to the Court of Appeal that they should have an extension of time to appeal the judgment upon which the bankruptcy notice is based.8
[18] Similarly, the Court’s discretion to grant a halt under s 42 is unfettered,9 but will be exercised in a manner that is just and equitable.10 Factors that may be relevant include: whether the debtor has prosecuted the appeal in good faith; the merits of the appeal (but only if the Court is of the view that the appeal is hopeless);11 the novelty and importance of the question on appeal; what stage the appeal has reached and whether there has been a delay in prosecuting the appeal; whether the bankruptcy proceeding might render the appeal nugatory (beyond the usual risk that, upon adjudication, the Official Assignee will not permit the debtor to continue the appeal);12 whether a halt of the proceeding would unduly harm creditors; the effect on third parties; and the public interest.13
[19]At the hearing, counsel focussed their submissions on the following issues:
(a)whether Mr Jindal’s appeal to the Court of Appeal had merit and was being prosecuted in good faith;
6Lynne Taylor and Grant Slevin The Law of Insolvency in New Zealand (Thomson Reuters, Wellington, 2016) at 90.
7 Bank of New Zealand v Koroniadis [2013] NZHC 2865 at [11].
8 Bank of New Zealand v Koroniadis [2013] NZHC 2865 at [12].
9 Mainzeal Property & Construction Ltd (in liq) v Yan [2020] NZHC 1659 at [13].
10 Lynne Taylor and Grant Slevin The Law of Insolvency in New Zealand (Thomson Reuters, Wellington, 2016) at 90.
11 Yeoh v Al Saffaf HC Auckland CIV-2006-404-1164, 21 June 2006; followed in Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV-2009-404-4175, 3 December 2009, at [10] and Mainzeal Property & Construction Ltd (in liq) v Yan [2020] NZHC 1659 at [13].
12Re Wright, ex parte Health Distributors Ltd HC Hamilton CIV 2010-419-121, 4 November 2010 at [17].
13Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV-2009-404-4175, 3 December 2009, at [10], as cited in Mainzeal Property & Construction Ltd (in liq) v Yan [2020] NZHC 1659 at [13].
(b)whether the prejudice Mr Jindal might suffer if adjudication was not halted was outweighed by the prejudice Jarden might suffer if it was;
(c)the wider interest of justice.
[20] Mr Jindal accepted that the subject of his appeal is Justice Powell’s refusal to give him an extension of time to appeal. Mr Jindal has not appealed or sought a stay of execution of the costs award. However, in his notice of appeal Mr Jindal asks that the costs award is reversed if he is successful in his appeal. He makes the same argument with respect to Judge Harrison’s decision. That is, if he succeeds in the Court of Appeal and then succeeds in the High Court in his appeal against Judge Harrison’s decision, he will apply to have the costs order made by Judge Harrison reversed. However, the third costs order will be payable whatever the outcome of his appeals, a fact that Mr Jindal acknowledged at the hearing.
[21]I reserved my decision.
Events after the hearing
[22] On the afternoon of the hearing, counsel for Jarden filed a memorandum advising that they had just learnt that, on 31 May 2021, District Court Judge L I Hinton entered summary judgment against Mr Jindal on a claim by the liquidator of his former company, Orange Capital Ltd (in liq).14 The judgment sum was $68,680.03. Jarden considered that Mr Jindal had misled the Court by not disclosing this judgment; and claimed that it was relevant to his current financial position and the public interest in his adjudication.
[23] On 17 June 2021, Judge Harrison heard Mr Jindal’s application to vary his 12 February 2020 order for security for costs in relation to Mr Jindal’s substantive claim against Jarden. In his decision of 21 June 2021,15 Judge Harrison amended the order, directing that Mr Jindal only pay security for costs incurred by the defendant
14 Orange Capital Ltd v Jindal DC Auckland CIV-2017-004-2856, 31 May 2021.
15 Jindal v OM Financial Ltd [2021] NZDC 11804.
from the inception of proceedings until the date on which the interim grant of legal aid to Mr Jindal was made (February 2021).16
[24] Mr Jindal filed a memorandum dated 28 June 2021 advising that he had filed a notice of appeal of the summary judgment decision and an application for stay of execution. Further, that he had been granted legal aid for his substantive claim against Jarden in the District Court. As such, he argued that the costs awards relied on by Jarden could be offset by a District Court judgment in his favour. In terms of this proceeding, the appropriate time for Mr Jindal to raise a potential cross-claim against Jarden was when he was served with the bankruptcy notice.17
[25] On 30 June 2021, the Deputy Registrar of the Court of Appeal determined Mr Jindal’s request for dispensation of the requirement to pay security for costs, seemingly at his request. The Registrar declined the application, concluding that while Mr Jindal was likely to be impecunious, a reasonable and solvent litigant would not risk incurring a further substantial costs award by pursuing a weak appeal of doubtful substantive merit and no public interest.18
[26] Then, on 6 July 2021, a highly relevant development. Mr Jindal paid the full amount of the costs awards underpinning the bankruptcy notice ($11,070.63) into the trust account of the solicitors for Jarden. By memorandum of that date, Mr Jindal sought time to try to reach agreement with Jarden about costs.
[27] On 9 July 2021, Jarden filed a memorandum stating that the issue of costs in the bankruptcy proceeding itself remained to be determined. It had made demand on Mr Jindal for 2B scale costs and said that it would engage with Mr Jindal to agree costs. If agreement could not be reached, Jarden would invite the court to make the bankruptcy order sought.
[28] By memorandum dated 13 July 2021, Mr Jindal requested four days to allow the parties to agree costs.
16Mr Jindal paid the security into the District Court on 6 and 9 August and the stay of proceedings was accordingly lifted.
17 Insolvency Act 2006, s 17(1)(d)(ii) and (7).
18 Accordingly, the security for costs of $7,060 remained payable and was due by 21 July 2021.
[29] On 22 July 2021, Mr Jindal filed a memorandum requesting that the Court immediately refuse Jarden’s application for bankruptcy under s 37(b), as he had paid the judgment debt. He sought that costs lie where they fall.
[30] On 23 July 2021, Jarden filed a memorandum confirming that it had been unable to agree costs with Mr Jindal. Jarden asked the Court to determine its application and adjudicate Mr Jindal bankrupt. Jarden sought scale costs of
$18,404.21 uplifted by 50 per cent, or alternatively 2B scale costs.
[31] On 27 July 2021, Mr Jindal filed a further memorandum, disputing that all the steps taken by Jarden had been reasonable or proper. He submitted his calculation of costs of $4,786.21. He asked that costs should lie where they fall.
[32] On 29 July 2021, Mr Jindal filed a memorandum informing the Court that he had applied to Justice Powell for a recall of the third costs order underlying the bankruptcy notice, because he was legally aided at the time it was made. He submitted that if the award was recalled, the debt he owed to Jarden reduced to $9,526.63. Jarden opposes this recall. Justice Powell has not yet decided Mr Jindal’s application.
[33]I will now turn to the issues I need to decide.
Should Mr Jindal be adjudicated bankrupt despite having paid the cost awards?
[34] Jarden submits that Mr Jindal has still committed an act of bankruptcy (by not meeting the bankruptcy notice) that means the Court still has jurisdiction to declare him bankrupt. It submits that bankruptcy is appropriate because:
(a)Mr Jindal has other creditors, including Orange Capital Ltd (in liq) which has judgment against Mr Jindal for $68,680.03;
(b)the issue of Jarden’s costs in the bankruptcy application is yet to be determined, and a fresh obligation on Mr Jindal to pay costs is relevant to whether Mr Jindal ought to be adjudicated bankrupt; and
(c)Mr Jindal was deliberately evasive about his financial position to the Court and Jarden, and his payment of the costs awards after his submissions at the hearing that he was impecunious makes an order for adjudication appropriate.
[35] I do not agree. The Court may only adjudicate a debtor bankrupt if the creditor has established that the requirements of s 13 are met.19 Those requirements include, besides the debtor having committed an act of bankruptcy within three months of the application, that the debtor owes the creditor $1,000 or more, the debt is a certain amount, and the debt is payable immediately or at a certain future date. If the full amount owed to the creditor by the debtor is paid in full after expiry of the period in the bankruptcy notice (and no further sums are owed to the creditor) this disentitles the creditor from proceeding with an application under s 13, because the debt has been satisfied.20 However, the act of bankruptcy remains available for any other creditor to rely on.21
[36] Mr Jindal may have other creditors, but no other creditor, including Orange Capital Ltd (in liq), has filed an appearance in this proceeding or an application for adjudication based on Mr Jindal’s act of bankruptcy.
[37] As to any costs order against Mr Jindal arising out of this proceeding, no such order has been made yet. There is no debt owed by Mr Jindal to Jarden entitling it to pursue its application for adjudication until a costs order is made and payable. Costs follow the determination.
[38] I agree that Mr Jindal has not been entirely forthcoming about his financial position. He plainly provided the Legal Aid Authority and the Court of Appeal Registry with enough information to satisfy the former that he qualifies for legal aid for his District Court proceeding, and the latter that he is likely to be impecunious for the purposes of a dispensation from paying security for costs. In the hearing before
19 Insolvency Act 2006, s 36.
20 Auckland Transport v Prescott [2015] NZHC 637 at [30].
21New Zealand Casing Co Finance Ltd v Henderson HC Auckland B1922-IM/99, 2 August 2000 at [14]. The second creditor would need to apply for judgment via summary judgment or otherwise for the act of bankruptcy against the first creditor to found the second creditor’s bankruptcy notice and application for adjudication – [19].
me, he submitted that his net disposable assets amounted to less than $3,500, and that his family situation and financial affairs left him no “spare money”. However, it is difficult to reconcile that statement with his payment of the costs awards after the hearing. But any lack of openness about his financial situation does not alter the fact that Mr Jindal has now satisfied the debt, disentitling Jarden to pursue their application.
[39]For these reasons I refuse to adjudicate Mr Jindal bankrupt.
Should Mr Jindal pay costs and if so, how much?
[40] By paying the sums owing, Mr Jindal has acknowledged the debt he owed Jarden and vindicated Jarden’s application for bankruptcy. Therefore, in a practical sense, Jarden is the successful party. The party who satisfies an amount owed to a judgment creditor will generally be liable for all costs reasonably incurred in the bankruptcy proceeding to date, unless agreed otherwise.22 In this case, Mr Jindal did not pay until the very last moment, after the hearing but before judgment was delivered. That timing is reflected in the amount of the overall cost award.
[41] In my assessment, the appropriate category for this proceeding is 2. While it is a bankruptcy proceeding, the hearing was not straightforward and involved issues of moderate complexity requiring counsel of average skill and experience. Most steps attract time band B, although some steps are more appropriately classified as band A. I have adjusted Jarden’s calculation accordingly in the attached schedule.
[42] Turning then to Jarden’s application for increased costs. Jarden submits that Mr Jindal’s failure to comply with the High Court Rules, meet the timetable and his filing of multiple memoranda and affidavits out of time and without leave contributed to unnecessary wasted cost. Further, Mr Jindal has a history of refusing to pay costs awards, and the cost awards underpinning the bankruptcy notice were over a year overdue. Moreover, his ground of opposition, that his appeal of Justice Powell’s judgment had a good prospect of success, was without merit. Jarden also points to his
22 Re Smith and Partners, ex parte Laurenson [2014] NZHC 389, (2014) 22 PRNZ 179 at [16]; Greys Avenue Investments Ltd v New Zealand Mint Ltd [2015] NZHC 2633, (2015) 22 PRNZ 801 at [33].
failure to provide evidence of the circumstances around Orange Capital Ltd (in liq) and his own financial position to the Court.
[43] Increased costs may be ordered where a party has failed to act reasonably.23 I am mindful that the question is whether the actions of the paying party during the proceeding (not before it) unnecessarily increased the cost.24 Mr Jindal’s conduct during the proceeding did increase the cost somewhat, by not complying with the timetable and repeatedly filing memoranda that required a response from Jarden. But that is already captured in the cost calculation submitted by Jarden, which I have largely accepted. Mr Jindal’s history of failing to pay costs awards and the age of the debt is not relevant to whether increased costs should be awarded.
[44] As to the merits of his appeal to the Court of Appeal, I agree that they are very weak. As I signalled to Mr Jindal at the hearing, his appeal is misguided in several respects. He is trying to hold NZX to account for what he perceives as improper conduct by a public entity through a private proceeding between himself and Jarden, to which NZX is not a party. Furthermore, he is confusing public law principles around perceptions of impartiality of public entities with the court’s jurisdiction to restrain a lawyer from acting in a particular case where the integrity of the judicial process would be impaired by counsel’s adversarial representation of one party against the other.25 The jurisdiction is not invoked to address concerns about the conduct of regulators such as the NZX. There are other avenues for complaints of that kind.
[45] However, I am not persuaded that the total lack of merit in Mr Jindal’s appeal justifies increased costs, because I do not consider that this factor increased the cost beyond what it would usually be for a defended bankruptcy application of moderate complexity.
[46] Overall, I am not persuaded that increased costs are justified. Scale costs on a 2B basis represent an appropriate sum. I am satisfied that the increased cost due to
23 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27](b).
24 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
25Millar v Millar [2013] NZHC 1302 at [13], quoting Black v Taylor [1993] 3 NZLR 403 (CA) at 412.
Mr Jindal’s conduct during the proceeding has been appropriately captured in the scale cost calculation.
Result
[47]I order:
(a)Jarden’s application that Mr Jindal is adjudicated bankrupt is dismissed;
(b)Mr Jindal will pay Jarden costs of $13,384 and disbursements of
$1,435.21 as set out in the attached schedule.
Associate Judge Gardiner
SCHEDULE
| COSTS | |
| Bankruptcy | |
| Filing and serving bankruptcy notice | 0.2 |
| Filing application for adjudication by creditor | 0.6 |
| Appearance at hearing (13 April 2021 at 10am before Associate Judge Sussock)26 | |
| Interlocutory application | |
|
|
|
| Preparation of written submissions | 1.5 |
| Preparation by applicant of bundle for hearing | 0.6 |
| Appearance (14 June 2021 – address judgment debtor’s non-compliance)28 | |
| Appearance (22 June 2021 at 10 am before Associate Judge Gardiner) | 0.5 |
| Memorandum of counsel dated 11 June 2021 | 0.4 |
| Memorandum of counsel dated 22 June 202129 | |
| Memorandum of counsel dated 30 June 2021 | 0.4 |
| Memorandum of counsel dated 2 July 202130 | |
| Memorandum of counsel dated 9 July 2021 | 0.4 |
| Memorandum of counsel dated 23 July 202131 | |
| $13,384.00 | |
| DISBURSEMENTS | |
| Filing a request for issue of bankruptcy notice | $173.91 |
| Serving bankruptcy notice | $150.00 |
| Filing a creditor’s application for adjudication | $434.78 |
| Serving summons | $120.00 |
| Scheduling fee | $556.52 |
| $1,435.21 | |
| TOTAL | $14,819.21 |
26Time allocation amended from 0.4 days (step 46 – appearance at bankruptcy hearing) to 0.2 days, as the fixture was a call, which is more akin to a mentions hearing or callover (step 12).
27Time already accounted for in allocation for step 45 (filing application for adjudication by creditor).
28 Time allocation for a mentions hearing or callover (step 12) of 0.2 days more appropriate.
29Counsel indicated time should be allocated for this step (not specified in Schedule 3) by analogy to step 11 (filing memorandum for case management conference or mentions hearing). I accept the analogy to step 11 but consider time allocation of 2A more appropriate than 2B as this was a simple memorandum.
30 2A, above n 31.
31 2A, above n 31.
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