Jones v New Zealand Bloodstock Finance & Leasing Ltd
[2021] NZHC 1228
•28 May 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1822
[2021] NZHC 1228
UNDER Rule 2.5 of the High Court Rules 2016 BETWEEN
GREGORY JOHN JONES
Applicant
AND
NEW ZEALAND BLOODSTOCK FINANCE & LEASING LIMITED
Respondent
CIV-2020-404-1357 UNDER
The Insolvency Act 2006
BETWEEN
GREGORY JOHN JONES
Applicant
AND
NEW ZEALAND BLOODSTOCK FINANCE & LEASING LIMITED
Respondent
Hearing: 3 February 2021 Appearances:
Appellant in person
F A King and A Osama for the Respondent
Judgment:
28 May 2021
JUDGMENT OF HARLAND J
This judgment was delivered by me on 28 May 2021, at 4 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:…………………………
Solicitors:
McKenna King, Hamilton Copy to the Appellant
JONES v NEW ZEALAND BLOODSTOCK FINANCE & LEASING LIMITED [2021] NZHC 1228 [28 May 2021]
Introduction
[1] Mr Jones applies for an order to review the Registrar’s decision to seal a summary judgment made by Jagose J on 5 June 2020.1 He also applies to set aside a bankruptcy notice and to stay the bankruptcy proceedings based on the sealed judgment.
[2] Mr Jones submits that the Registrar was not entitled to seal the judgment for the amounts of interest and solicitor-client costs, and therefore the bankruptcy notice upon which it is based should be set aside. He also submits that any bankruptcy proceedings should be stayed or “halted” until the various appeals he has to the Court of Appeal in relation to the summary judgment have been heard.
[3] The respondent, New Zealand Bloodstock Finance & Leasing Ltd (NZ Bloodstock) opposes both applications.
[4] A large amount of material was filed by both parties in support of their respective positions on the applications. Further submissions were filed after the hearing to cover matters that were less than clear during the hearing on 3 February 2021.
[5] I have decided to grant both applications. This judgment sets out the reasons for my decision.
The factual background
[6] On 6 September 2019, NZ Bloodstock sought summary judgment on its claim against Mr Jones for an amount of $431,630.22 (plus interest and solicitor-client costs) in repayment of credit provided to him in connection with his bloodstock business. There were two contractual documents upon which the claim was based: a credit contract (a current advances contract), and a lease to purchase bloodstock agreement (the lease). Mr Jones opposed the application on various grounds including that he had a cross claim and/or equitable set-off against NZ Bloodstock.
1 New Zealand Bloodstock Finance & Leasing Ltd v Jones [2020] NZHC 1233, (2020) 25 PRNZ 347.
[7] Prior to the summary judgment hearing, Mr Jones filed two interlocutory applications dated 19 and 25 May 2020 dealing with pre-trial evidential issues. He also filed applications to adjourn the hearing and stay the application for summary judgment. None of these applications were dealt with before the summary judgment hearing.
[8] The summary judgment hearing proceeded before Jagose J on 26 May 2020 and the Judge delivered judgment in respect of it on 5 June 2020. The application for summary judgment was granted.2 Mr Jones’ other applications for adjournment, stay of the proceedings and pre-trial evidential rulings were also dismissed.
[9] On 16 June 2020, Mr Jones sought leave to appeal to the Court of Appeal against Jagose J’s decision to dismiss his interlocutory applications. He also applied for a stay of execution of the 5 June judgment.
[10] Counsel for NZ Bloodstock then filed a memorandum dated 1 July 2020 seeking to recover the sum of $591,875.76 purportedly based on the judgment of Jagose J. A copy of this memorandum was purportedly emailed to Mr Jones at the same time it was filed, on 2 July 2020; however, receipt of it was not, and has never been, acknowledged by Mr Jones.
[11] The order for summary judgment appears to have been sealed by the High Court on 6 July 2020 for the amount included in NZ Bloodstock’s costs memorandum of 1 July 2020. I say “appears” because orders are backdated by the Registry to the date of the judgment (here 5 June 2020), and there is no record of the actual date of sealing. However, the front page of the original sealed judgment is stamped with the date 6 July 2020. This date is corroborated by the sealing order fee receipt scanned onto the back of the order, which is dated 6/07/2020.
[12]The sealed judgment is as follows:
1.On 5 June 2020, His Honour Jagose J granted summary judgment of
$431,632.22 (plus interest and solicitor-client costs), in favour of the plaintiff.
2 Jones, above n 1, at [38].
2.Judgment is given that the plaintiff recovers $591,875.76, being:
2.1.$431,632.22 principal debt;
2.2.$52,221.59 interest; and
2.3.$108,021.95 solicitor-client costs.
[13] On 9 July 2020, Jagose J dismissed Mr Jones’ applications for leave to appeal to the Court of Appeal and for a stay of execution of the summary judgment; however, there are still two extant appeals to the Court of Appeal from the summary judgment proceedings, both in relation to the substantive judgment and in relation to three interlocutory applications.
[14] On 16 July 2020, the sealed order was purportedly served on Mr Jones by way of email. This email referred to email service being permitted because of Mr Jones’ notice of representation dated 29 November 2020. On the face of it, this reference does not make sense, as the date given for the notice of representation is after the date of the email. A check of the Registry file reveals that the date of the document concerned is 29 November 2019. This document is a notice under r 5.41 of the High Court Rules 2016 (the Rules) confirming that Mr Jones intended to act in person. His address for service included an email address.
[15] NZ Bloodstock relies on the email of 16 July 2020 as service on Mr Jones of the order thereby requiring him to pay the sum of $591,875.76 within 28 days of the email. The email refers to this deadline being 13 August 2020 and a trust account deposit slip was enclosed to enable payment.
[16] Mr Jones did not confirm that he had been served with the sealed order on 16 July 2020. In these proceedings, Mr Fraser filed a supplementary affidavit attaching the email correspondence dated 16 July 2020 and further email correspondence of 21 January 2021 and 25 January 2021 purporting to re-serve the sealed order on Mr Jones, this time with the sealed order attached as it had apparently not been included as an attachment to the 16 July 2020 email.3
3 The sealed order had been annexed to Mr Fraser’s first affidavit.
[17] Mr Jones did not and has not paid all or any of the amount referred to above to NZ Bloodstock.
[18] On 14 August 2020, NZ Bloodstock applied to the High Court for a bankruptcy notice to be issued.
[19]A bankruptcy notice was issued on 20 August 2020.
[20] On 27 August 2020 at 11:49am, counsel for NZ Bloodstock sent an email to Mr Jones attaching the bankruptcy notice and stating that Mr Jones was in breach of the sealed order.
[21] Mr Jones sent an email response at 11:59am on 27 August 2020, saying: “Please withdraw the bankruptcy notice immediately. You were not entitled to seal the judgment on which it is based as the judgment is not in accordance with the judgment of his honour. If you proceed I will institute proceedings against you in respect of this mistake. I am currently preparing a stay of execution in this matter for the Court of Appeal. My suggestion is you refrain from proceeding until that is heard. Please advise your intentions immnediately (sic).”
[22] Counsel for NZ Bloodstock responded by email at 12:29pm on 27 August 2020 that the notice would not be withdrawn. The email also says: “Please find attached email service of the judgment on you.” However, the email attached to Mr Jones’ affidavit does not include a copy of the sealed judgment. Mr Jones replied at 12:42pm: “I leave that to you. You are aware of the ramifications of proceeding having been placed on notice about its deficiencies.”
[23] On 16 September 2020 the bankruptcy notice was again served upon Mr Jones. Mr Jones had 10 working days from the date of service of the notice to comply with it. The expiry of 10 working days from the date of service was 30 September 2020. Mr Jones did not pay all or any of the amount referred to in the bankruptcy notice to NZ Bloodstock.
[24] The application to set aside the bankruptcy notice by Mr Jones was served on counsel for NZ Bloodstock on 30 September 2020. NZ Bloodstock has therefore not applied for adjudication.
Application to review Registrar’s decision to seal judgment
The application and notice of opposition
[25] Mr Jones’ original application for a review of the Registrar’s decision to seal judgment related only to the interest and solicitor-client costs included in the order, not the principal sum of $431,632.22.4
[26] The day before this hearing, Mr Jones filed an amended application entitled “amended application for orders that the Registrar’s decision to seal judgment for a sum including solicitor-client costs be reviewed”. The amended application does not change or amend the nature of the challenge to the sealed order as outlined;5 however, there is a slight amendment to paragraph 3 of the application, which outlines the legal basis for it. To support his application, Mr Jones now relies on rr 1.6, 2.5, 2.6, 2.11,
11.11 and 14 of the Rules, s 151 of the Senior Courts Act 2016, the inherent jurisdiction of the Court and a minute of Nation J, Fisher v Fisher.6
[27] Counsel for NZ Bloodstock opposed the Court receiving the amended application and affidavit but conceded there was no prejudice because of it having been filed just before the hearing. Accordingly, while not a practice to be encouraged, I allow the filing of the amended application.
[28] NZ Bloodstock opposed the application on the grounds that it has been brought out of time and there is no legal basis for it under the provisions relied on by Mr Jones. It relied on rr 2.11 and 14.1 of the Rules, and Jagose J’s judgment of 5 June 2020.
4 The original application was dated 30 September 2020.
5 The amended application appears to relate more in substance to the application to set aside the bankruptcy notice as it repeats paragraphs 1 and 2 of Mr Jones’ original application for that order.
6 Fisher v Fisher HC Auckland CIV-2015-404-574, 14 April 2016.
The arguments – an overview
[29]Mr Jones submitted that:
(a)Jagose J did not in fact award solicitor-client costs or interest in his judgment, as the evidence before the Judge did not include a calculation for interest or solicitor-client costs and therefore could only relate to judgment on the principal sum.
(b)If interest was awarded, the statement of claim sought interest at the rate of 10 per cent per annum whereas the judgment subsequently sealed incorrectly included interest at the rate of 16 per cent per annum.
(c)The statement of claim did not seek solicitor-client costs, but if it did, NZ Bloodstock, through its memorandum for costs, sought to introduce additional evidence after the hearing and the Registrar sealed the judgment on the basis of that evidence, which he or she was not entitled to do under rr 2.5 to 2.10 of the Rules, as sealed orders can only contain material that was part of the judgment being sealed, as held by Nation J in Fisher v Fisher.7
(d)These are not matters that can or should be dealt with on appeal.
[30]Mr King for NZ Bloodstock submitted that:
(a)Judgment was granted upon the terms of the statement of claim and therefore Mr Jones was required to pay solicitor-client costs and interest.
(b)The Registrar, having access to the statement of claim, judgment and memorandum of counsel, was entitled to seal the order based on the contractual interest rate of 16 per cent.
7 Fisher, above n 6, at [4]–[5].
(c)Any perceived issues with the sealed judgment are a matter for appeal.
(d)The Rules do not permit the sealing of the judgment to be reviewed, but if they do, the application has been out of time, which is fatal.
The issues
[31]From the above, I distil the issues I need to determine as:
(a)Did the Registrar correctly seal the judgment in relation to interest and/or solicitor-client costs?
(b)If the answer to (a) is no, how should this be remedied?
[32]I deal with each issue in turn.
Did the Registrar correctly seal the judgment in relation to interest and solicitor- client costs?
[33] Rule 11.11 of the Rules deals with the sealing of judgments by a Registrar. It provides:
11.11 Judgments to be sealed, dated, and served
(1)A Registrar must seal judgments with the seal of the court.
(2)A judgment must be sealed—
(a)in accordance with any direction given by the Judge relating to the sealing of the judgment; or
(b)if no direction is given, at any time after the judgment is given.
(3)Except with the leave of the court, a judgment must not be sealed until any application under rule 11.9 for the recall of the judgment is determined.
(4)A sealed judgment must state—
(a)the date on which the judgment is given; and
(b)Revoked.
(5)A party who has a judgment sealed must immediately serve a sealed copy of it on—
(a)every other party who has given an address for service; and
(b)any other person who, although not a party, is affected by the judgment.
[34] The first point is that a Registrar “must” seal a judgment in either of the two circumstances outlined in subs (2). In this case, subs (2)(b) applies. The second point (and there was no dispute about this) is that “the judgment” in this case is the judgment given by Jagose J on 5 June 2020. The question then arises whether the judgment awarded interest and solicitor-client (i.e. indemnity costs) in favour of NZ Bloodstock.
[35] The first paragraph of the judgment outlines that interest and solicitor-client costs are part of the claim and in the “Result” section of the judgment, judgment is said to be given “against Mr Jones on NZ Bloodstock’s claim dated 3 September 2019”.8 The “claim” is the statement of claim described at [1] of the judgment in which NZ Bloodstock specifically claimed interest at the rate of 10 per cent and solicitor-client costs against Mr Jones.
[36] There is no reference in the judgment to evidence or argument during the hearing about interest and costs, apart from the description of NZ Bloodstock’s statement of claim at [1], and Jagose J’s specific references to interest and/or costs at [3], [4] and [6] of the judgment.9 Paragraphs [3] and [4] outline the parts of the current advances contract that refer to interest at the rate of 10 per cent on the unpaid daily balance,10 and that Mr Jones was to pay “all legal fees (on a solicitor-client basis) and other fees and expenses” incurred by NZ Bloodstock in enforcing the contract.11 Paragraph [6] refers to the part of the lease to purchase agreement dealing with costs. It says that “under the lease, Mr Jones was to ‘indemnify’ NZ Bloodstock for its costs and expenses incurred under the lease, including ‘in recovering any moneys secured hereunder”.
8 Jones, above n 1, at [1] and [42].
9 Jagose J also referred to interest at [18], [13] and [27] of the judgment, in relation to cashflow, NZ Bloodstock’s solicitors’ revision of the current advances contract, and Mr Jones’ initial default under the lease agreement.
10 Jones, above n 1, at [3].
11 At [4].
[37] Mr King submitted that in relation to interest, the “discounted” 10 per cent interest rate was an original position taken to help Mr Jones repay his debt, but that Mr Jones ignored this offer. He submitted that NZ Bloodstock then sought the penalty rate of 16 per cent in its costs memorandum based upon its contracts with Mr Jones. Mr King further submitted that the Registrar, having access to the statement of claim, judgment and the costs memorandum, was entitled to seal the order based on the contractual interest rate of 16 per cent.
[38] I have no difficulty in concluding that by referring to giving judgment on the “claim”, the Judge was not only referring to the principal sum claimed by NZ Bloodstock against Mr Jones, but he was also referring to interest on the judgment sum at the rate of 10 per cent because this is what was claimed. In the absence of an amendment to the claim for interest either before or during the hearing, NZ Bloodstock was not entitled to claim interest at the contract rate of 16 per cent as it did in its memorandum after the hearing, given that there is nothing in the judgment to indicate that this rate of interest, contained as a default rate in the contractual documents, had been replaced by that which had been sought in the statement of claim.
[39] Mr Jones’ argument that no interest was payable at all is more properly dealt with on appeal, as it seems to be entwined with his arguments about the principal sum being able to be set-off and/or subject to a counter claim. For the purposes of this application, however, I am satisfied that the Registrar was able to seal the principal sum owing of $431,632.22 as well as interest at a rate of 10 per cent.
[40] The position in relation to solicitor-client costs is more complex, however, because although such costs were claimed, if the Court did not receive any evidence about quantum during the hearing or if costs were not impliedly reserved to be dealt with later, Mr Jones was not able to challenge the reasonableness of the costs.
[41] Mr King’s argument was firstly that it was not possible, nor expected, that the statement of claim would or could have detailed the amount of solicitor-client costs and interest sought, and it is standard practice that these matters are addressed by filing a memorandum of costs and interest after the judgment.
[42] Mr King next submitted that viewing the statement of claim as a whole, it is evident NZ Bloodstock sought solicitor-client costs due to a contractual entitlement because the two contracts were the foundation of the proceedings. He submitted that it does not matter that the statement of claim does not spell this out explicitly.
[43] Although Mr King submitted that the usual practice is to file a memorandum dealing with solicitor-client costs after the hearing, as this case reveals, such a practice can create unfairness to the persons against whom such costs are sought if they are not able to challenge the reasonableness of them. But more fundamentally, it is the Judge who must determine the reasonableness of any solicitor-client costs claimed, not the Registrar, because such costs are part of the judgment. In the absence of solicitor- client costs being specifically addressed in the judgment, counsel ought to have brought the matter back to the Judge for his attention prior to asking the Registrar to seal the judgment.
[44] While not cited to me by counsel, Black v ASB Bank Ltd is instructive.12 That case concerned an appeal from a decision granting ASB Bank’s application for summary judgment against Mr Black, after which the Judge awarded indemnity costs against Mr Black in favour of ASB. The award of indemnity costs was based upon the contractual provisions of two security documents. One of the issues on appeal was whether the Judge had erred in awarding indemnity costs. The Court of Appeal considered the principles that apply when determining whether indemnity costs should be awarded. In doing so, it reiterated the principles it had outlined in Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd.13 The Court held:
[80] Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:
(a)what tasks attract a costs indemnity on a proper construction of the contract;
(b)whether the tasks undertaken were those contemplated in the contract;
12 Black v ASB Bank Ltd [2012] NZCA 384.
13 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZConvC 191,873 (CA) at 191,886–191,887.
(c)whether the steps undertaken were reasonably necessary in pursuance of those tasks;
(d)whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and
(e)whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.
[45] The Court of Appeal then observed that during a typically busy summary judgment list, it would not be feasible for the Court to undertake a detailed assessment of the reasonableness of indemnity costs claimed under a contract, and it reiterated the observations it had made in Frater Williams, where it was held that there was “room for robust judgment as to the costs considered reasonable in all the circumstances”.14 If a party is not content with that “robust judgment”, the Court of Appeal in Black outlined that the dissatisfied party has three options: first, to ask the Judge to make an order for indemnity costs subject to taxation; second, the parties could agree to be bound by the decision of a suitably qualified practitioner who vets the reasonableness of the costs; and third, the parties could refer the fee note(s) to the New Zealand Law Society to revise under the provisions of the then applicable Law Practitioners Act 1982.15
[46] Although I have set out in detail the salient aspects of the Court of Appeal’s decision in Black, a significant distinguishing point in that case was that the reasonableness of the indemnity costs had been considered by the Judge, whereas in this case, that did not occur. It was counsel for the plaintiff’s responsibility to raise the issue of costs with the Judge, particularly as indemnity (solicitor-client costs) had been sought in the claim and because of this, the reasonableness of those costs was a matter the Judge would need to address. It follows that Mr Jones did not have the opportunity to challenge the reasonableness of the solicitor-client costs claimed in front of the Judge, which is where that argument ought to have been advanced.
[47] Mr King submitted that full details about the costs sought were raised in his memorandum of 1 July 2020 that was sent to the Registrar. This is correct, however
14 Frater Williams, above n 13, at 191,887.
15 Black, above n 12, at [82]–[84].
there is no actual proof that Mr Jones received this email, because although a copy of the email purportedly sent to Mr Jones was provided in these proceedings, there is no evidence to specifically link the generic name of the email address at the top of the communication (namely “greg jones”) with the email address provided in the notice of representation. Although a technical point, in the absence of Mr Jones accepting that he had been served, there is room for doubt about whether this did in fact occur. This is particularly so because Mr Jones’ actions after being served with the bankruptcy notice appear to suggest he would likely have moved very quickly to respond to the memorandum had he received it.
[48] As well as some doubt existing about service, the contents of the costs memorandum itself confirms why it is for the Judge who heard the case to determine whether indemnity costs should be awarded, and if so, what amount is reasonable. In the memorandum (comprising five pages but with over 40 pages of annexed material being invoices and time records), counsel addressed the reasonableness of the costs sought at paragraph 3 where he acknowledged that “the legal costs for obtaining summary judgment may at first glance appear high”. He then went on to allege delay by Mr Jones, comment on the various interlocutory steps taken by Mr Jones and record the fact of Mr Jones’ notice of appeal of 25 May 2020, although any costs in relation to the notice of appeal would be irrelevant to costs on the summary judgment application as they would be dealt with on appeal. The important point to note is that these were all matters that the Judge would have been aware of and would be best placed to assess and take into account if he considered them to be relevant.
[49] Further and somewhat at odds with another of his arguments, Mr King submitted that the Registrar does not make a “decision” under r 11.11 when he seals a judgment; however, this is precisely what the Registrar was being asked to do in this case, namely the Registrar was being asked to decide the reasonableness of the indemnity costs.
[50] I conclude that the Registrar was not authorised to seal the order for costs based on counsel for NZ Bloodstock’s memorandum, because such costs had not been
determined by the Judge. As Nation J said in Fisher v Fisher, sealed orders must only contain material that was part of the Court’s decision.16
[51] To summarise, in my view, the judgment to be sealed required interest to be fixed at a rate of 10 per cent and should not have included solicitor-client costs as these had not at that point been determined by the Judge. This means the judgment as sealed did not comply with a fundamental requirement of r 11.11 because it did not accord with the judgment. In my view these errors are material and not trivial, as they increase the purported amount owing by $127,605.05. The question now is how these errors can be remedied.
How can the errors in the sealed judgment be remedied?
[52] Mr Jones submitted that I have the power to review the exercise of the Registrar’s jurisdiction to seal the order and if (as I have found) it was incorrectly sealed in certain respects, I can make any order in relation to it that I think is just. The power for me to do this, Mr Jones submitted, was contained in r 2.11, but if that did not specifically apply, he submitted that r 1.6 could be used to the same effect.
[53] Mr King submitted that Mr Jones had incorrectly relied on r 2.5 rather than r 2.11. He submitted that r 2.11 does not empower the Court to review a Registrar’s decision to seal a judgment under r 11.11 because r 2.11 only applies to the Registrar’s exercise of jurisdiction conferred by Part 2, subpart 2 of the Rules. In addition, he submitted that r 11.11 places a mandatory requirement on Registrars to seal orders and sealing is not a “decision” under r 2.11. Mr King submitted that, even if the Court can review the sealing under r 2.11, Mr Jones’ application is time-barred because he did not bring it within the 5 day period specified in r 2.11, nor did he apply for an extension of time under r 1.19.
Rules 2.5 – 2.11
[54] Rules 2.5 to 2.10 outline the jurisdiction and powers of a Registrar, including powers relating to interlocutory applications.
16 Fisher, above n 6, at [4]–[5].
[55]Rule 2.11 outlines when a Registrar’s decision can be reviewed. It provides:
2.11 Review of Registrar’s decision
(1)An affected party to a proceeding or an intended proceeding may apply to a Judge by interlocutory application for a review of any of the following:
(a)a Registrar’s exercise of jurisdiction:
(b)a Registrar’s refusal to file a document tendered for filing:
(c) a Registrar’s refusal to perform a duty placed on him or her under these rules.
(2)The Judge may, on review, make any orders he or she thinks just.
(3)It is not necessary to apply for an order for an extraordinary remedy under Part 30 or to make an application for review under the Judicial Review Procedure Act 2016 when seeking a review under subclause (1)(b) or (c).
(4)Notice of an application for review must be filed, —
(a)if it is made by a party who was present or represented when the decision or refusal of the Registrar was given, within 5 working days of the decision or refusal; or
(b) if it is made by a party who was not present or represented, within 5 working days after the receipt by the party of notice of the decision or refusal.
(5)An application for review under this rule is not a stay of proceeding or a step in the proceeding, unless a Judge, or a Registrar acting under rule 2.5, so directs.
[56] I disagree with Mr King that Mr Jones incorrectly relied on r 2.5 in his application for review. Mr Jones expressly relied on r 2.11. However, I accept that, as submitted by Mr King, r 2.11 does not empower the Court to review a Registrar’s decision to seal a judgment under r 11.11. This is because r 2.11 relates only to the Registrar’s powers as conferred by Part 2, subpart 2 of the Rules, whereas the sealing of judgments is governed by Part 11. As Mr King submitted, this point is emphasised by the authors of McGechan on Procedure:17
The previous version of [r 2.11], r 276, expressly referred to “[a]ny decision of a Registrar in exercise of his jurisdiction under rule 270 or rule 271” (the equivalents of rr 2.5 and 2.6). Despite the removal of any reference to specific
17 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR2.11.01].
rules in r 2.11(1)(a), the expression “exercise of jurisdiction” is still intended to relate only to the Registrar’s jurisdiction as conferred by Part 2, subpart 2.
[57] Despite this procedural impediment, Mr Jones submitted that r 1.6 should be invoked and by analogy, the powers under r 2.11 applied.
[58] Mr King’s submissions did not specifically address r 1.6 and whether through that provision I could or should apply the approach taken in r 2.11.
[59] As outlined above, r 2.11 is entitled “Review of Registrar’s decision” and r 2.11 (1) outlines what “decisions” can be reviewed. Mr King’s submission contrasted the powers of the Registrar under r 2.5 with the powers to seal under r 11.11, making the point that the former requires an exercise of judgment, whereas the latter is more administrative in nature. I agree with Mr King that the requirement to seal does not amount to a “decision” as commonly understood, but I nonetheless consider it to be an exercise of jurisdiction in the sense a power to do something required under the Rules. In that sense, r 2.11 is useful by way of analogy, although it is not on all fours with what is being undertaken when the Registrar exercises his or her power under r 11.11.
Rule 1.6
[60]It is now necessary to consider r 1.6, which provides:
1.6 Cases not provided for
(1)If any case arises for which no form of procedure is prescribed by any Act or rules or regulations or by these rules, the court must dispose of the case as nearly as may be practicable in accordance with the provisions of these rules affecting any similar case.
(2)If there are no such rules, it must be disposed of in the manner that the court thinks is best calculated to promote the objective of these rules (see rule 1.2).
[61] The question therefore arises whether it is appropriate to invoke r 1.6 in this case. I approach this task by first considering what other remedies there may be under
the Rules to rectify the errors in the sealed judgment which I determine are not trivial, given that in total the errors increase the purported amount owing by $127,605.05.18
[62] It was common ground that the judgment could not be recalled under r 11.9 as the sealing of the order is an impediment to this occurring. I did not receive submissions about whether the slip rule (r 11.10) would apply, however because of the amount involved, the use of this rule would also not be appropriate.
[63] I turn now to case law invoking or rejecting the use of r 1.6. There are no cases directly on point addressing its use in this context, however, there are several that outline matters of principle that I now consider.
[64] In Coolstores (New Zealand) Ltd v Sunplus Products Ltd the equivalent of the then r 1.6 was considered.19 The Court held that the aim of the rule is to fill in procedural gaps in the Rules, not to introduce matters of substance.
[65] In Merisant Co Inc v Flujo Sanguineo Holdings Pty Ltd, the Court of Appeal noted:20
[Rule 1.6] reflects the Court’s inherent jurisdiction to control its own procedure. Where there is no applicable rule the Court must dispose of the case as near as may be practicable in accordance with analogous rules. In r 1.6(2) it is provided that if no such rules can be applied, the case must be disposed of to promote the objective of the rules, which is to secure the just, speedy and inexpensive determination of the interlocutory application or proceeding.
[66] In Prestige Motors Ltd v My Trustee Company (Nikolas and Petra) Ltd, the applicant sought to vary sealed orders pursuant to r 1.6. It argued that r 1.6 could be used to vary an existing rule, r 7.49, which provides for variation of interlocutory orders. Gordon J refused the application, saying:21
Nor do I accept that r 1.6 can be applied to vary existing procedural rules such as r 7.49. Rule 1.6 only applies to fill gaps where there are no procedural rules governing the particular situation. To apply r 1.6 to expand r 7.49 in the way
18 This figure constitutes the solicitor-client costs plus the difference between the interest calculated as owing by Mr Jones if the rate is 10 per cent rather than 16 per cent.
19 Coolstores (New Zealand) Ltd v Sunplus Products Ltd [1977] 1 NZLR 690 (SC) at 694.
20 Merisant Co Inc v Flujo Sanguineo Holdings Pty Ltd [2018] NZCA 390, (2018) 24 PRNZ 480 at [18].
21 Prestige Motors Ltd v My Trustee Company (Nikolas and Petra) Ltd [2021] NZHC 895 at [50].
MTC submits can be done would have the opposite effect. It would cut across the express wording and application of r 7.49 which, as I have said, only applies to interlocutory orders.
Rule 1.6 and inherent jurisdiction
[67] It is worth noting the similarities between r 1.6 and the Court’s inherent jurisdiction. As the Court of Appeal explained in Merisant, r 1.6 reflects the Court’s inherent jurisdiction to control its own procedure.22 In Re Tupou, Edwards J noted that the power to review a decision of the Deputy Registrar falls within a Judge’s inherent power to direct and supervise Registrars in relation to the business of the Court.23 The Judge said:24
A Judge’s inherent power is to be exercised consistently with express statutory provisions and applicable rules. In this case the inherent power should be exercised consistently with s 160(4), and with regard to r 2.11 of the High Court Rules which provides for the review of Registrar’s decisions made under those rules. Review under r 2.11 proceeds by way of a full rehearing.
[68] In discussing this inherent power, the Judge cited r 1.6, noting that the rule enables the Judge to dispose of a case as nearly as may be practicable in accordance with the provisions of the Rules.25
[69] In Robert Jones Investments Ltd v Gardner, Tipping J emphasised that the Court’s inherent jurisdiction should not be used to expand or obviate existing rules:26
… if the power cannot be found in the rule it is inappropriate to invoke the inherent jurisdiction of the Court. To do so is tantamount to saying that where the ground is covered by a rule, but the Judge sees problems in the rule, the inherent jurisdiction may be resorted to in order to expand or obviate the rule. If that is correct the utility and force of rules are seriously undermined. It is not a case where a rule does not cover the point…
[70] This recalls Gordon J’s comment in Prestige Motors that r 1.6 cannot be used to cut across the express wording and application of an existing rule.27
22 Merisant, above n 20, at [18].
23 Re Tupou [2018] NZHC 637, (2018) 24 PRNZ 275 at [12].
24 At [12].
25 At n 4.
26 Robert Jones Investments Ltd v Gardner (1994) 7 PRNZ 567 (HC) at 570.
27 Prestige Motors Ltd, above n 21, at [50].
Is there a gap in the Rules?
[71] I am satisfied that there is no specific rule dealing with the problem that faces me in this case. Put another way, there is a gap in the Rules when it comes to reviewing the Registrar’s “decision” to seal a judgment. However, before determining whether I ought to fill this gap under r 1.6 (with reference to r 2.11), I must consider the remaining two matters submitted to me, namely what is the relevance of r 2.11 in relation to the time limits for making an application to review the decision in question, and whether rather setting aside the sealed judgment, this matter can be dealt with on appeal.
Should the time limit in r 2.11 apply to this case?
[72] Rule 2.11(4) requires that an application to review a Registrar’s decision be filed by a party within 5 working days of the decision. This time frame can be extended pursuant to r 1.19, which provides:
1.19 Extending and shortening time
(1) The court may, in its discretion, extend or shorten the time appointed by these rules, or fixed by any order, for doing any act or taking any proceeding or any step in a proceeding, on such terms (if any) as the court thinks just.
(2) The court may order an extension of time although the application for the extension is not made until after the expiration of the time appointed or fixed.
[73] Mr King submitted that the order was served on Mr Jones twice: on 16 July 2020 and again on 16 September 2020; however, his firm also emailed the order to Mr Jones on 27 August 2020, to which Mr Jones replied that same day as outlined above.
[74] This email correspondence shows Mr Jones knew about the sealed order on 27 August 2020, yet he only filed his application for review on 30 September 2020, over a month later. He did not file an application for an extension of time under r 1.19.
[75] As this judgment reveals, the process to “fix” the aspects of the judgment that were incorrectly sealed is not straightforward and, in my view, it would be unfair to require the late filing of the application to be a barrier to remedying the substantive difficulties that flow from it. Should it be in any doubt, I extend the timeframe for
filing the application under r 1.19 to 30 September 2020, the date upon which Mr Jones filed his application for review.
Are any errors with the sealed judgment properly able to be dealt with on appeal?
[76] Mr King submitted that any errors associated with the sealed judgment can be dealt with on appeal; however, Mr Jones disagreed.
[77] I agree with Mr Jones that these matters are not appropriately dealt with on appeal, particularly in relation to costs. This is because, on my analysis, costs were not dealt with by the Judge, or even argued before him. Accordingly, there is no decision on this aspect from which an appeal could be brought.
Should I invoke r 1.6?
[78] Having considered the time limit issue and whether the errors with the sealed judgment could be dealt with on appeal, I conclude that there is no ability under the Rules to correct the errors as they have presented themselves in this sealed judgment and that it is appropriate to invoke r 1.6 to deal with this unfortunate situation. In doing so, I consider r 2.11 to be the most analogous and helpful rule to guide such a process. Rule 2.11 provides that, in reviewing a Registrar’s exercise of jurisdiction, the Judge may make any orders he or she thinks just. In my view, using this process rather than the Court’s inherent jurisdiction to remedy the error is more appropriate.
[79] The next question is what orders I should make as a result. Mr Jones submitted that I should set aside the bankruptcy notice, given that it is based on the incorrectly sealed judgment, whereas Mr King submitted that the errors with the judgment and notice could be corrected through bankruptcy procedures under the Insolvency Act 2006.
Should the sealed order be set aside or quashed, or is this a matter able to be dealt with under the Insolvency Act procedures?
[80] As outlined above, Mr Jones’ application to review the sealed order was coupled with his application to set aside the bankruptcy notice.
[81] Counsel for NZ Bloodstock opposed the application, submitting that the bankruptcy procedures were robust enough to amend the wrong done as a result of the incorrectly sealed judgment. First, Mr King submitted that Mr Jones’ emails of 27 August 2020 do not meet the requirements of s 30 of the Insolvency Act to give notice of an overstatement of the amount owing and therefore the bankruptcy notice remains valid.
[82] Mr King then relied on s 418 of the Insolvency Act, highlighting the Court’s wide-reaching powers to remedy any defects in a bankruptcy notice. He submitted:
(a)The solicitor-client costs remain able to be claimed; however, in the event that they cannot yet be claimed in a bankruptcy notice, that defect can be remedied by removing solicitor-client costs, leaving only interest and the principal amount of $369,800.22.
(b)Interest at 10 per cent was pleaded (notwithstanding the possibility of a contractual right to claim 16 per cent) and Jagose J’s judgment dated 5 June 2020 delivered judgment as per the pleadings, so the overstated interest can be remedied under s 418 from $52,221.59 to $32,638.49.28
(c)If interest and solicitor-client costs cannot and should not be claimed, the principal amount owing under the two loan contracts of
$369,800.22 can still be claimed in the bankruptcy notice.
[83] Confusion continues to reign. This is because Mr King’s submissions in response refer to the principal judgment of $369,800.22 as opposed to that which appears to have been claimed under the two contracts and referred to in Jagose J’s judgment as comprising a total of $431,632.22.
28 This calculation was set out in paragraph 74 of the respondent’s written submissions dated 25 January 2021, as being a calculation of the interest payable between 3 September 2019 until 5 June 2020, i.e. 276 days divided by 365 days in a year, times by 0.10 interest. Although para 74 of the respondent’s submissions calculated the total to be reduced from $591,875.76 by $19,883.10 to $572,292.66, this calculation results in fact in a reduction of $19,583.10, which would reduce the total judgment as sealed to $571,992.66.
[84] Mr Jones submitted that if the Court is satisfied under s 30(1) that there has been an overstatement of the amount owing and the notification of the dispute was appropriately provided by him to NZ Bloodstock, then the bankruptcy notice should be set aside. In these circumstances, he submitted that there is no basis to amend the bankruptcy notice, as NZ Bloodstock would need to make an application pursuant to s 418 in order to invoke that provision and has not done so.
[85]Section 30 of the Insolvency Act provides:
30 Effect of overstatement of amount owing
(1)Overstatement in a bankruptcy notice of the amount owing by the debtor does not invalidate the notice, unless—
(a) the debtor notifies the creditor that the debtor disputes the validity of the notice because it overstates the amount owing; and
(b) the debtor makes that notification within the time specified in the notice for the debtor to comply with the notice.
(2)A debtor complies with a notice that overstates the amount owing by— (a) taking steps that would have been compliance with the notice had it stated the correct amount owing (for example, by paying the creditor the correct amount owing plus costs); and (b) taking those steps within the time specified in the notice for the debtor to comply.
[86] Section 418 allows the Court to cure defects in a bankruptcy notice, so long as the defect does not prejudice the debtor. It provides:
418 Defects in proceedings
(1)A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect.
(2)The court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the court thinks appropriate in the interests of everyone who has an interest in the proceeding.
[87] In my view, given the extent of the procedural errors in the sealed judgment, which had a substantive effect on Mr Jones, the more fundamentally appropriate course of action in my view is to set aside the sealed order. It follows that the
bankruptcy notice, which is based on the sealed order, must also be set aside in its entirety.29
[88] Given this conclusion, I do not need to deal with ss 30 and 418 any further because once the bankruptcy notice is set aside there is nothing for me to amend or deem invalid. But had I been required to determine whether s 30 applies, I would have determined that Mr Jones gave sufficient notice under s 30.
Conclusion
[89] For the reasons given, I have determined that the errors in the incorrectly sealed judgment, and the bankruptcy notice based upon the judgment, are significant enough to warrant both being set aside in their entirety. The Registrar was not entitled to seal the judgment for solicitor-client costs because the reasonableness of such costs was a matter for the Judge to determine, rather than the Registrar.
[90] I have also determined that Jagose J’s judgment in relation to the principal sum owing of $431,632.22 was able to be sealed by the Registrar. This amount comprises the:
(a)$369,800.22 principal debt under the current advances contract; and
(b)$61,832 principal debt under the lease to purchase agreement.
[91] In addition, I have determined that the interest sought at the rate of 10 per cent was able to be sealed by the Registrar. In accordance with NZ Bloodstock’s calculation, this amounts to $32,638.49.
[92] Although Mr Jones argued that Jagose J is functus officio in relation to the costs aspect of his judgment, that submission may not be correct. While one of the options put forward by NZ Bloodstock indicated a preparedness to relinquish its claim in relation to solicitor-client costs, it seems to me that solution was predicated on the basis that I may decide not to set aside the bankruptcy notice, but rather to amend it.
29 See Hair v Schmidt [2014] NZHC 2476 at [46]–[47].
In the light of this judgment, NZ Bloodstock may decide to review its position in respect of this, given that a plaintiff who is successful is normally entitled to costs.30
Result
[93] The applications to set aside the sealed judgment and the bankruptcy notice are granted.
[94]Costs are reserved.
Harland J
30 High Court Rules 2016, r 14(2)(1)(a).
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