Lynch v White
[2016] NZHC 792
•26 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2282 [2016] NZHC 792
IN THE MATTER of the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Amanda Adele White
BETWEEN
CHRISTOPHER MAURICE LYNCH Judgment Creditor
AND
AMANDA ADELE WHITE Judgment Debtor
Hearing: 11 April 2016 Counsel:
Appearance:
PJ White for judgment creditors and defendant
CT Jones for Official Assignee in the estates of AA White andALE Freeman
AA White, judgment debtor in person
No appearance on behalf of defendants in CIV-2014-404-3311Judgment:
26 April 2016
JUDGMENT OF FAIRE J
This judgment was delivered by me on 26 April 2016 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Sellar Bone, Auckland
Ministry of Business, Innovation and Employment, Auckland
To: A White, Auckland
Lynch v White [2016] NZHC 792 [26 April 2016]
IN THE MATTER CIV-2014-404-2284
of the Insolvency Act 2006
IN THE MATTER
of the bankruptcy of Anne Leoline Emily
FreemanBETWEEN
CHRISTOPHER MAURICE LYNCH Judgment Creditor
AND
ANNE LEOLINE EMILY FREEMAN Judgment Debtor
CIV-2014-404-2485
BETWEEN
AMANDA ADELE WHITE First Plaintiff
ANNE LEOLINE EMILY FREEMAN Second Plaintiff
AND
CHRISTOPHER MAURICE LYNCH First Defendant
STUART GORDON SPENCE Second Defendant
The application
[1] On 29 February 2016 Ms White and Ms Freeman filed an application seeking a stay or suspending enforcement of the orders made by me in my judgment of
15 December 2015.1
Procedural background
[2] In my judgment delivered on 15 December 2015:
(a) I declined the application of Ms White and Ms Freeman to rescind my earlier judgment of 14 May 2015; and
(b) Made orders adjudicating Ms White and Ms Freeman bankrupt.
[3] My judgment of 14 May 2015 struck out a statement of claim filed by Ms White and Ms Freeman. That statement of claim had sought orders setting aside a judgment given by Priestley J on 19 June 2013.2 I recorded the three claims made
in the statement of claim as follows:3
[5] The first is a claim that the judgment was obtained by fraud and is therefore a collateral attack on the judgment. The defendants allege that the plaintiffs’ case does not satisfy the test which must be met to allow such an attack to be made.
[6] The second is that the various specific claims for remedies sought from Mr Spence in the proceeding are matters that were dealt with by Priestley J in the judgment.
[7] The third is that the various allegations amounting to negligence are made against Mr Lynch and likewise, were dealt with by Priestley J in his judgment. Accordingly, the defendants claim that those claims are barred either by the principle of res judicata or issue estoppel.
[4] Ms White and Ms Freeman applied to set aside my judgment of 14 May
2015. Their application was made in reliance on r 7.51 on the basis that my earlier judgment had been given in respect of an interlocutory application, namely the strike out application, and therefore was amenable to challenge under r 7.51.
[5] My judgment of 15 December 2015, however, dealt with matters in addition to the application under r 7.51, namely, applications for the adjudication of Ms White and Ms Freeman. My judgment gave reasons why orders of adjudication should be made and proceeded to adjudicate both bankrupt.
[6] Ms White was involved in another unrelated proceeding, being the proceeding CIV-2014-404-3311. Interlocutory applications involved in that proceeding were considered at a conference before Woodhouse J on 11 February
2016. He noted that the conference was to deal with timetabling of interlocutory
applications as follows:
2 Spence v Lynch [2013] NZHC 1478.
(a) The plaintiff ’s interim application against the first and second
defendants, which has now been served;
(b) The plaintiff’s application requiring the first and second defendants to
admit facts;
(c) The application by the first and second defendants for security for costs; and
(d) The application by the first and second defendants to strike out the
plaintiffs’ claim.
His Honour directed that a fixture be allocated for those applications for a ½-day and recommended that as Whata J had dealt with substantive issues, that it may be preferable for the applications to be heard by Whata J.
[7] The Registry allocated a fixture in accordance with Woodhouse J’s directions for 10 am on 2 May 2016 on the understanding that the applications would be heard by Whata J.
[8] The Official Assignee in the bankrupt estate of Ms White filed a memorandum on 17 February 2016. That advised the Court of Ms White’s bankruptcy. She is the plaintiff in the proceeding CIV-2014-404-3311, discussed above. The memorandum advised that the proceeding relates to alleged property of Ms White and that the cause of action vested in the Official Assignee by the operation of s 101 of the Insolvency Act 2006. He drew attention to Schedule 1 of the Insolvency Act and, in particular that the Official Assignee has power to continue or discontinue that proceeding. The memorandum advised that the Official Assignee did not wish to continue the proceeding but, at that time, did not wish to formally discontinue it.
[9] Heath J directed a conference before me so that the issue could be discussed as to whether there is any reason why the Official Assignee should not discontinue the proceeding to give effect to his decision not to continue.
[10] Before a conference could be convened, Ms White filed the current application. She advised that she sought an order suspending her adjudication pending an appeal to the Court of Appeal. The application was treated as made in reliance on s 416 of the Insolvency Act. The application was filed on 29 February
2016 and, accordingly, was not a matter that any notice of had been given to Heath J. It is appropriate that I record that until an order of suspension is made; the adjudication is not halted having regard to s 415 of the Insolvency Act.
[11] The application for suspension was dealt with by Toogood J on 10 March
2016 when directions were made for the filing of notices of opposition, affidavits and submissions. A fixture was allocated for 10 June 2016.
[12] When the conference directed by Heath J came before me on 15 March it appeared that the application in CIV-2014-404-3311 should await the determination of the suspension application. Arrangements were therefore made for an urgent hearing of the suspension application to be heard before me, which led to my vacating the directions made by Toogood J. The hearing that I am now required to determine by judgment occurred as a result.
Purpose of current application
[13] The order of adjudication was based on non-compliance with a bankruptcy notice. The bankruptcy notice was issued as a result of a judgment of the Court of Appeal delivered on 2 July 2014.4 That judgment ordered the plaintiffs to pay defendants’ costs in the sum of $3,433. The Court of Appeal judgment dealt with interlocutory issues which arose on an appeal against the decision of Priestley J. The substantive appeal from that decision has not yet been determined.
[14] I found that the requirements of ss 13 and 36 of the Insolvency Act 2006 had been met in this case. In my view, the issue which required determination was whether the court’s discretion pursuant to s 37 of the Insolvency Act should be
exercised by refusing to adjudicate the judgment debtors as bankrupt. The exercise
4 White v Spence [2014] NZCA 298.
of the discretion is necessarily affected by the outcome of the application to rescind my judgment of 14 May 2015.5
A bankrupt may pursue an appeal irrespective of whether an order is made pursuant to s 416 of the Insolvency Act to suspend the order of adjudication pending the hearing of the appeal.6 Accordingly, it is open to Ms White and her mother, Ms Freeman, to pursue an appeal from the order of adjudication regardless of the outcome of this application.
[15] What is clear, however, is that the filing of an appeal against an order of adjudication does not lead necessarily to a suspension being granted.7
[16] Therefore, the purpose of the suspension application in this case is to permit Ms White in her own name, rather than the Official Assignee, to appeal my refusal to grant her the relief that she sought under r 7.51 and, second, to grant her status to prosecute two of the plaintiff applications in the proceeding CIV-2014-404-3311.
[17] Accordingly, it is with respect to these additional purposes just mentioned that the application for suspension must be considered.
[18] Where there is a desire to challenge the judgment giving rise to adjudication, it is a matter which the Official Assignee may pursue in the name of the bankrupt if the Official Assignee considers it has merit.8 That follows from the fact that the assets of the bankrupt are transmitted to the Official Assignee pursuant to s 101 of the Insolvency Act on the making of the order of adjudication.
The court’s approach to an application for suspension pending appeal
[19] In Bioletti v Commissioner of Inland the Court of Appeal set out eight factors which it said were convenient matters to have before it when considering
5 White v Lynch, above n 1 at [3].
6 Lindsay v Vaucluse Holdings Ltd CA 272/99, 13 December 1999 at [3]-[4].
7 Re Harrison, ex parte Harrison [2015] NZHC 1054 at [22].
8 Lindsay v Vaucluse Holdings Ltd, above n 6, at [5].
applications for suspension.9 They were borrowed from applications for stay. The factors identified by the Court of Appeal are:
(a) whether the appellant’s right of appeal would be rendered nugatory if
no stay is given;
(b) the bona fides of the applicant as to the prosecution of the appeal;
(c) whether the successful party would be injuriously affected by the stay; (d) the effect on third parties;
(e) the novelty and importance of the questions involved; (f) the public interest in the proceeding;
(g) the overall balance of convenience; and
(h) the strength of the appeal.10
[20] I deal with each of those matters. As to the question of whether the adjudication itself would render the appeal nugatory, the position as I have already recorded, is that the refusal of a suspension order will not affect the applicant’s right of appeal against the adjudication. In this case, however, it does impact upon Ms White’s ability to appeal my decision given under r 7.51.
[21] I will return to this issue when considering the factor, the strength of the appeal.
[22] I proceed to the second factor. Although Ms White has not prosecuted the appeal on the substantive judgment of Priestley J, which is her overall objective, I do
not doubt that she does wish to pursue whatever avenues are available to her,
9 Bioletti v Commissioner of Inland Revenue [2013] NZCA 465 at [3].
10 At [4] – [11].
including appeals from my judgments, in her efforts to attack the judgment of
Priestley J.
[23] I deal with the third factor: whether or not Messrs Lynch and Spence will be injuriously affected if suspension is made. They adopt the usual position of creditors in this situation and submit that they are injuriously affected if Ms White and Ms Freeman are freed from the constraints imposed by bankruptcy. Inevitably, they will be forced to oppose other applications that they should bring as they pursue all manner of attacks on the original judgment of Priestley J. The effect is to put Messrs Lynch and Spence to considerable expense of opposing those applications.
[24] I refer to the next matter, that is, the effect on third parties. I have referred to the other litigation which is on foot and in which Ms White seeks relief from two defendants. That apparently arises out of a dispute in which she had a contract for agistment of a horse. The proceedings are not referred to in the application for a suspension. I refer to the four applications that are involved. It is impossible for me, on the material that I have before me, to make any assessment of the chances of success by Ms White in respect of the applications which she seeks to prosecute. Importantly, also, whether she can successfully oppose two of the applications which are filed by the defendants. Those matters, in my view, should be left to the Official Assignee and if there is some issue taken as to whether the Official Assignee has taken a proper stand, then the remedies available to Ms White under the Insolvency
Act are the remedies that should be pursued.11 Certainly, for the purposes of this
proceeding, the issue of the effect on third parties has not been proven to me to be an issue that supports the application for suspension.
[25] The next factor is whether there is some novelty or importance involved in the questions that will arise on the appeal. The short answer is I can find no such novelty or issue of importance.
[26] Similarly, with the next factor, there is no public interest in this particular proceeding. That matter certainly would not justify the making of an order. Nor is
there any factor which might suggests the balance of convenience favours the making an order of suspension.
[27] I proceed to the last factor, which is the strength of the appeal. Ms White has not displayed to me that there is any proper foundation for the appeal. Importantly, however, one must remember the history. The current proceedings relate to the matters that were first investigated in my judgment of 14 May 2015. Ms White appealed that decision. Security for costs were set. Ms White applied to have security dispensed with beyond the time limit provided by the Court of Appeal (Civil) Rules 2005. That application was dismissed by the Registrar. Ms White applied to review that decision. The review application was heard by Randerson J in the Court of Appeal. His Honour gave judgment on the papers on 17 August 2015 and declined the application. I referred to his Honour’s judgment in my judgment of
15 December 2015. For the sake of completeness, I refer to the paragraphs of his
Honour’s judgment referred to in my judgment as follows:12
[21] This question depends substantially on whether security for costs should be dispensed with if an extension of time is granted. In Reekie v Attorney-General, the Supreme Court held that the Registrar (or a single Judge on review) should only dispense with security if it is right to require the respondent to defend the judgment under appeal without protection as to costs. Whether it is right is a matter of discretion which turns on whether the Court should preserve an impecunious person’s access to the Court for an appeal that a solvent person would reasonably wish to prosecute.
[22] The appeal brought by the appellants is not reasonably arguable.
Their substantive appeal amounts to a collateral attack against the original decision of Priestley J and his clear finding that there was no profit-sharing agreement between the parties. An appeal against that decision was filed in this Court and cannot be pursued unless security is paid. The appellants are now seeking to relitigate the same issue by way of an appeal against the decision of Faire J. They are bringing their appeal on the basis of evidence this Court has already refused to admit on their first appeal.
[23] We also note that the bankruptcy notices issued against the appellants relied on a costs order made by this Court. That order can no longer be challenged.
[28] I refer next to my judgment of 15 December 2015. Once again, the issue that
I had to determine has been before a member of the Court of Appeal dealing with the
question of security for costs. Ms White had applied for an order dispensing with security. A deputy-registrar of the Court of Appeal declined that application in a decision dated 15 March 2016. That directed that security of $6,600 was to be paid by 14 April 2016. No evidence had been provided to me that that security has been paid. I have since the hearing received a notice from the Court of Appeal advising that the appeal is deemed to have been abandoned as at 15 April 2016.
[29] Ms White then applied to have the deputy-registrar’s decision reviewed. The matter came before Wild J and he gave judgment on 22 March 2016. In his judgment he upheld the deputy-registrar’s decision refusing to dispense with security. The following passages from his judgment are important:13
[6] Underlying this application, and the appeal itself, is the appellants’ view that the respondents have perpetrated a fraud on them by deliberately withholding vital evidential documents, namely Mr Spence’s bank statements.
[7] The appellants hold fast to this view notwithstanding the findings made by Priestley J in his substantive judgment of 19 June 2013, the conclusion reached by Faire J in his judgment of 14 May 2015, and this Court’s views expressed in its judgment of 2 July 2014 as to the
1,000 pages approximately of additional material the appellants sought to adduce in support of their appeal against Priestley J’s
substantive judgment of 19 June 2013, and also their attempted
appeal against Priestley J’s costs judgment of 11 October 2013.
[8] It is apparent that the appellants resolutely refuse to accept that their view that they have been defrauded by the respondents is unfounded, and that no amount of judicial consideration and reconsideration will dissuade them. I sense that the appellants have become obsessed with their conviction that they have been defrauded. They have lost any objectivity or balance, not helped by the fact that, latterly, they have not had the advantage of objective professional advice and representation.
[9] I am unable to fault Deputy Registrar McGrath’s assessment of the factors relevant to an application to dispense with security for costs. In particular, I endorse her view that this appeal lacks merit. Indeed, in my view it has no realistic prospect of success. That is because it is essentially a further attempt to substantiate the appellants’ belief that they have been defrauded and to have this Court look at Mr Spence’s bank statements, something this Court made clear in its
2 July 2014 judgment that it was not prepared to do.
[30] The overwhelming position is that the appeal lacks merit and certainly provides no foundation or support for suspension of the adjudication order.
[31] Ms White has since the hearing advised that she has applied for leave to appeal the decision of Wild J. For reasons set out in [33] in view of the abandonment of the appeal, that cannot affect the outcome of this application.
[32] In view of the advice received from the Court of Appeal that the appeal is deemed abandoned, it is now not possible to make an order pursuant to s 416 of the Insolvency Act 2006 because there is no founding appeal on which that jurisdiction can be exercised. Nevertheless, in case there are applications to extend time, I have set out my reasons in full which would have applied if the appeal had not been deemed abandoned.
[33] On the day before the hearing, a Sunday, Ms White emailed to the court a document entitled Plaintiff/judgment debtors memorandum in anticipation of the 11th April 2016 hearing before Faire J re the suspension of adjudication. Ms White did not specifically address this memorandum in the hearing and, indeed, chose not to return to court after the luncheon adjournment. Its contents, however, do not address the specific reasons for the failure of past applications that she has made in her overall attempt to attack and set aside the judgment of Priestley J. It did not assist me in resolution of the current case.
Result
[34] I conclude therefore that the application for an order suspending the order of adjudication, even if it were able to be framed in a way that made it applicable to allow the pursuit personally by Ms White of some her grievances, is not justified.
[35] The application is accordingly refused.
Costs
[36] Mr Jones appeared on behalf of the Official Assignee and agreed to abide the decision of the Court. I apprehend it is unlikely that the Official Assignee would wish to be heard on the question of costs.
[37] Counsel for Messrs Lynch and Spence, however, indicated a desire to seek indemnity costs from the applicants. I doubt, having regard to their financial circumstances, that there would be any point in pursuing that application but as I did not hear specifically from the parties on the question, I reserve costs. If costs are sought and the parties agree on costs, a joint memorandum shall be filed. If there is no agreement as to costs, memoranda shall be filed in support, opposition and reply at seven-day intervals on receipt of this judgment. The file shall then be referred to
me to deal with the question of costs.
JA Faire J
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