Lawton v Sewell
[2023] NZHC 1939
•24 July 2023
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2023-441-000003
[2023] NZHC 1939
BETWEEN JULIAN EDWARD LAWTON
Applicant/Judgment Debtor
AND
DENISE CHERIDAH SEWELL
Respondent/Judgment Creditor
Hearing: 21 July 2023 (by VMR) Appearances:
P Ross for Applicant
L Blomfield for Respondent
Judgment:
24 July 2023
JUDGMENT OF VENNING J
This judgment was delivered by me on 24 July 2023 at 12.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Cathedral Lane Law, Napier
Sainsbury Logan & Williams, Napier
LAWTON v SEWELL [2023] NZHC 1939 [24 July 2023]
Introduction
[1] Denise Sewell obtained a judgment for costs in the sum of $11,717.40 against Julian Lawton in the District Court at Napier on 17 December 2021. Ms Sewell then issued a bankruptcy notice against Mr Lawton. Mr Lawton seeks to set aside that bankruptcy notice.
Application to set aside
[2]Mr Lawton says:
(a)he has a cross-claim equal to or exceeding the value of the judgment debt;
(b)there is an extant appeal which raises the correctness of the substantive decision on which the costs judgment is based; and
(c)generally it is in the interests of justice the notice be set aside.
[3] The costs order was made by Judge K D Kelly.1 It followed an earlier decision of the Judge, in which he had declined Mr Lawton’s application for a restraining order under the Harassment Act 1997 against Ms Sewell.2
Judgment Creditor’s response
[4]Ms Sewell opposes the application to stay on the grounds:
(a)Mr Lawton does not have a cross-claim of true substance which he genuinely wishes to pursue;
(b)Mr Lawton cannot establish the damages of any cross-claim will equal or exceed the costs award;
1 Lawton v Sewell [2021] NZDC 25024.
2 Lawton v Sewell [2021] NZDC 21701.
(c)Mr Lawton has not issued any proceedings and has made little effort to progress the appeal.
[5]Both parties have filed affidavits to support their position.
Statutory background
[6] The relevant statutory and regulatory background is s 17 of the Insolvency Act and High Court Rules 2016, r 24.10. The relevant provisions of s 17 of the Insolvency Act provide:
17 Failure to comply with bankruptcy notice
(1)A debtor commits an act of bankruptcy if—
…
(d)the debtor has not, within the time limit specified in subsection (4),—
(i)complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
…
(4)The time limit referred to in subsection (1)(d) is,—
(a)if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service; or
(b)if the debtor is served outside New Zealand, the time specified in the order of the court permitting service outside New Zealand.
…
(7)In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that—
(a)is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and
(b)the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.
[7]High Court Rules 24.10 is in the following terms:
24.10 Setting aside bankruptcy notice
(1)If an application to set aside a bankruptcy notice cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.
(2)An act of bankruptcy is not committed by reason only of non- compliance with the notice until the application has been determined.
Applicable principles
[8] The principal issue on this application is whether Mr Lawton can satisfy the Court there is a triable issue that he has a counterclaim or cross-demand which equals or exceeds the amount of the costs judgment. In the decision of Re Field ex parte BFS Marketing Ltd, Anderson J stated:3
The debtor must satisfy the Court that there is some serious issue to be tried in connection with the alleged counterclaim, set-off or cross-demand, such that it would be wrong to allow the bankruptcy proceeding to continue. Certainly it is not enough for a debtor to merely raise the possibility of a counterclaim, set-off or cross-demand. There must be a substantial issue for determination.
[9]In Clark v UDC Finance Ltd Casey J went further and stated:4
Lockhart J discussed the test to be applied under corresponding Bankruptcy Rules at p 439 of Re Brink, ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433, 437. After a review of relevant English and Australian decisions he followed the High Court view in Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346, 350 that the debtor must show a prima facie case, adding that he should have “a fair chance of success”.
[10] In Sharma v ANZ Banking Group (New Zealand) Limited the Court of Appeal confirmed the debtor must satisfy the Court of a “genuine and triable claim, at least to a sufficient extent in monetary terms to bring it … near the equality or excess required
…”.5
3 Re Field HC Auckland B1907/93, 23 March 1994.
4 Clark v UDC Finance Ltd [1985] 2 NZLR 636.
5 Sharma v ANZ Banking Group (New Zealand) Limited (1992) 6 PRNZ 386.
Background
[11] Mr Lawton and Ms Sewell share a right-of-way. Mr Lawton has a tenant at his property as well. The right-of-way is also shared with a third party, Ken Simpson.6
[12] Mr Lawton’s property is at the end of the right-of-way. To exercise his rights over it he has to pass Ms Sewell’s property. Unfortunately Mr Lawton and Ms Sewell have fallen out over the use of the right-of-way. Mr Lawton considers that Ms Sewell deliberately blocks his access and use of the right-of-way.
[13] Mr Lawton issued a trespass notice in September 2020 and in November 2020 applied for a restraining order under the Harassment Act 1997.
[14] In December 2020 there was an incident when Ms Sewell threw eggs at Mr Lawton’s car. He says that as a result the paint work was damaged.
[15] The application for the restraining order was heard by Judge K D Kelly on 27 October 2021. In a judgment delivered on 5 November 2021 Judge Kelly refused the application.7 The Judge subsequently awarded Ms Sewell costs.8
[16] Mr Lawton has appealed against the substantive decision (but has not appealed against the costs decision). Mr Lawton says Ms Sewell’s obstructive behaviour has continued after the judgment. Ms Sewell disputes this and says Mr Lawton has sworn at and abused her.
[17] It is unfortunate that Mr Lawton and Ms Sewell seem unable, even with the assistance of counsel, to resolve the issues between them. However, absent any sensible resolution of the issues between them the Court is left to deal with the application before it in accordance with the statutory provisions and the principles referred to above.
6 Mr Simpson and Ms Sewell were involved in separate proceedings. Ms Sewell was successful in those proceedings as well. Mr Simpson is not involved in the present proceedings.
7 Lawton v Sewell, above n 2.
8 Lawton v Sewell, above n 1.
Analysis
[18] As a preliminary point, and as Mr Ross acknowledged, the fact Mr Lawton has appealed against the decision of the District Court, is not in itself a ground for setting aside the bankruptcy notice. That is particularly so in the present case where it is apparent from the record that Mr Lawton has not progressed that appeal with any real commitment at all. Mr Lawton lodged the appeal on 30 November 2021 but only paid security in late June 2022. He also failed to comply with timetable orders fixed by consent. The issue of the appeal and Mr Lawton’s dilatory approach to it must be for a later day if this current application is dismissed.
[19] Similarly, the further evidence that Mr Lawton seeks to raise as to Ms Sewell’s alleged actions after the hearing is only presently relevant to the issue of whether or not it discloses an actionable claim so that Mr Lawton can satisfy the Court he has a cross-claim against Ms Lawton that is equal to or greater than the judgment debt.
[20] The focus of the Court’s attention on this application is whether Mr Lawton has such a cross-claim against Ms Sewell.
[21]In support of that cross-claim Mr Lawton raises two matters:
(a)first the damage to his car as a result of the “egging” of it by Ms Sewell; and
(b)a claim in nuisance for Ms Sewell’s continued actions after the delivery of the District Court judgment.
[22] In support of the potential cross-claim Mr Ross submitted that as a result of the “egging” of Mr Lawton’s car, Mr Lawton had a good claim in trespass to goods which could include the cost of repairs to remedy the damage, the consequential loss while the car was being repaired, and exemplary damages. He referred to and relied on the decision of Jamieson’s Tow & Salvage Ltd v Murray for the availability of an award of exemplary damages.9
9 Jamieson’s Tow & Salvage Ltd v Murray [1984] 2 NZLR 144.
[23] Mr Lawton has provided evidence that he has a quote for repairs of the car of around $2,000. He says the whole car had to be repainted meaning it was not available to him for some time during which he suffered additional losses of $4,000. Mr Ross submitted that as the “egging” was deliberate exemplary damages would likely be appropriate.
[24] As to the nuisance claim, Mr Ross submitted that on Mr Lawton’s evidence Ms Sewell had provided an undertaking to the District Court Judge during the hearing that, now that she understood the legal position, she would not block the right-of-way in the future. But she had continued to do so.
[25] While Mr Ross accepted that despite Mr Lawton’s reference to an undertaking there is no reference to such an undertaking in the District Court, he submitted that, on the basis of Mr Lawton’s evidence Ms Sewell had continued to block the right-of- way. Mr Lawton provided evidence of photographs showing the right-of-way blocked by Ms Sewell’s daughter’s car. As such Mr Ross submitted Mr Lawton had an arguable claim for nuisance and possibly exemplary damages in relation to that claim as well.
[26] On the issue of the potential claim for the “egging” Mr Lawton’s car, I note and accept Ms Blomfield’s submission that although Mr Lawton apparently now seeks to pursue such a claim he has taken no steps to do so and in fact it was raised for the first time in his affidavit of 21 May 2023. Mr Lawton made no demand in relation to the claim even though he relied on the incident in the course of his District Court proceedings against Ms Sewell. The claim was only raised some months after the bankruptcy notice was issued. Further, the material before the Court provided by Mr Lawton to support the present claim is in the form of a quote in January 2021 rather than an actual paid invoice for the work. There is nothing, apart from Mr Lawton’s assertion, to support a consequential damages’ claim.
[27] The action of the tow company’s employee in Jamieson Tow & Salvage Ltd10 was far more egregious than Ms Sewell’s conduct. But even in that case the award of exemplary damages was modest. Even allowing for inflation from 1984, the $500
10 Jamieson’s Tow & Salvage Ltd v Murray, above n 9.
would equate to less than $2,000 now. In the circumstances the claim for damage in relation to the egging of Mr Lawton’s car, if made out, is likely to be in the range of
$2,000 to $3,000 in total at most.
[28] In relation to the alleged claim for nuisance based on Ms Sewell or her daughter blocking the right-of-way after the judgment in the District Court, the photographs are ambiguous. It appears that in one of the photographs relied on, the car blocking Mr Lawton’s access to his property is actually that of his tenant, rather than Ms Sewell’s or her daughter’s car. It is not entirely clear from the other photographs whether or not a car could have travelled past down the driveway even though Ms Sewell’s daughter’s car was parked on the driveway.
[29] Even if Ms Sewell did block the driveway from time to time the issue of whether that would lead in the exercise of the Court’s judgment to a damages award for nuisance is debatable. At most such a claim is speculative. The quantum of is certainly unknown and again would be limited.
Summary
[30] The short point is that, on the information currently before the Court, Mr Lawton fails to satisfy the Court that he has more than the possibility of a cross- demand. He fails to satisfy the Court that the cross-demand approaches or is near to the amount of the judgment debt which the Court of Appeal in Sharma confirmed was required.11
Result
[31] For the above reasons the application to set aside the bankruptcy notice is dismissed.
Costs
[32] As counsel acknowledged costs should follow the event. Mr Lawton is to pay Ms Sewell costs on a 2B basis together with disbursements as fixed by the Registrar.
11 Sharma v ANZ Banking Group (New Zealand) Limited, above n 5.
[33] As discussed with counsel the obvious answer to this particular case is for the parties to reach some accommodation with some allowance being made for the damage potentially caused to Mr Lawton’s car by the “egging” of it by Ms Sewell with Mr Lawton paying the balance of the costs awards to Ms Sewell. That may be a faint hope given the background but the parties are urged to consider that rather than spending further unnecessary money on these proceedings.
Venning J
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