Malley & Co v Burgess

[2017] NZHC 2581

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-000439 [2017] NZHC 2581

IN THE MATTER	of the Insolvency Act 2006
AND
IN THE MATTER	of the bankruptcy of Gary Owen Burgess
BETWEEN	MALLEY & CO Judgment Creditor
AND	GARY OWEN BURGESS Judgment Debtor

Hearing:	18 October 2017
Appearances:	A J Gaborieau for Judgment Creditor G O Burgess (Judgment Debtor) in person
Judgment:	24 October 2017

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [on adjudication application]

The question

[1]      Malley  &  Co  applies  for  the  adjudication  of  Gary  Owen  Burgess  in bankruptcy. There is no issue as to the fact that Mr Burgess is insolvent.

[2]      The question in this case is whether the Court should, by again halting the adjudication   application,   give  Mr   Burgess   a   third  opportunity  to   pursue  a

MALLEY & CO v BURGESS [2017] NZHC 2581 [24 October 2017]

counterclaim which he asserts to be greater than the judgment debt ($43,844.29 plus interest).1

[3]      The  answer  is  –  No.    Mr  Burgess  has  had  two  opportunities  –  through pursuing his counterclaim unsuccessfully in this Court,2  and then in pursuing an unsuccessful appeal to the Court of Appeal.3    The creditor’s rights in relation to an insolvent debtor and the balancing of interests are overwhelmingly in favour of the Court, rather than ordering a halt, dealing now with the adjudication application.

Background

[4]      The full background to dealings between Mr Burgess and Malley & Co is lengthy.  It is detailed in the 13 September 2017 judgment of the Court of Appeal in Burgess v Malley & Co.4   I now summarise it.

[5]      In February 2008, Mr Burgess instructed Malley & Co to act for him in relationship property proceedings.  Mr Burgess became entitled to take a property at Medbury.  The Medbury property was later lost to Mr Burgess through a mortgagee sale.

[6]      Malley & Co claimed fees for their work for Mr Burgess and ultimately obtained judgment for those fees.  A judicial review was pursued by Mr Burgess in relation to a Standards Committee decision concerning those fees. Malley & Co became a judgment creditor by reason of the costs award in that proceeding.  It is that  costs  award  which  was  the subject-matter  of the  bankruptcy notice in  this proceeding.

[7]      Mr Burgess considers Malley & Co responsible for the loss of the Medbury property and associated costs as well as general and exemplary damages. When Malley & Co issued their proceeding to recover their outstanding fees, Mr Burgess

counterclaimed.  On 5 May 2016, Gendall J gave judgment in favour of Malley &

1      Being costs and disbursements awarded in Malley & Co v Burgess [2014] NZHC 2981.

2      Malley & Co v Burgess [2016] NZHC 907.

3      Burgess v Malley & Co [2017] NZCA 401.

4      Burgess v Malley & Co, above n 3, at [4]–[29].

Co for costs and disbursements of $54,594.81 plus interest and the costs of the

hearing.  Mr Burgess’s counterclaim was dismissed.

[8]      Malley  &  Co  then  issued  the  bankruptcy  notice  (relying  on  the  judicial review costs award), upon which this application is based.   Mr Burgess applied unsuccessfully to have the bankruptcy notice set aside.

[9]      In the meantime, Mr Burgess had filed a notice of appeal from the 5 May

2016 judgment. That appeal was subsequently allocated a hearing for July 2017.

[10]     Malley & Co filed this application for an adjudication order in December

2016.    Mr Burgess filed opposition, asserting amongst other things that he had “a triable counterclaim before the Court of Appeal”.

[11]     Mr Burgess applied for an order halting the adjudication application.  I heard that application (opposed by Malley & Co) in May 2017,5  in the shadow of the pending Court of Appeal hearing.  I took into account an observation of Miller J in the Court of Appeal, when he was dealing with an interlocutory issue relating to the appeal, that “the merit of the appeal is not strong”.   I viewed that as impliedly recognising that there may be “hope” in some aspects.  On balance, I concluded that

many factors weighed against the dismissal of the adjudication application as a matter of the Court’s discretion.   But what marked out the case was the imminent hearing of Mr Burgess’s appeal (in July) in relation to the legal costs/counterclaim judgment.

[12]     At the same time, I recognised the strength of Ms Gaborieau’s submission, for Malley & Co, that it might be regarded as inappropriate to await the outcome in the Court of Appeal.  I observed:6

[74]     Ms Gaborieau submitted that it would be inappropriate to await the outcome in the Court of Appeal because, on Mr Burgess’s track record of litigation, it can be anticipated that (if unsuccessful on his appeal) he would immediately pursue leave to appeal to the Supreme Court. I do not find that to be a compelling factor against halting the adjudication application for the time  being. That  is  for  two  reasons.  First,  any  application  made  to  the

5      Malley & Co v Burgess [2017] NZHC 950.

6      Malley & Co v Burgess, above n 5.

Supreme Court for leave to appeal would be doomed to failure because Mr Burgess’s  intended  counterclaims  were  factually  based  and  do  not  raise issues which would justify a grant of leave. Secondly, the conditions which I will attach to an order halting the adjudication application will entitle Malley

& Co, if the Court of Appeal dismisses Mr Burgess’s appeal, to return to this Court for an adjudication order following the Court of Appeal’s rejection of Mr Burgess’s appeal grounds.

[13]     Mr Burgess’s appeal was wholly unsuccessful.   The Court of Appeal noted that the notice of appeal had listed 35 grounds of appeal and that Mr Burgess had raised two more grounds in submissions.  The Court succinctly recorded, “[n]one of them had any merit and the appeal is accordingly dismissed”.7

[14]     The Court awarded increased costs (standard appeal costs on a Band A basis with a 25 per cent uplift), upon the basis that Mr Burgess had contributed unnecessarily or unreasonably to the cost of the appeal by raised a multiplicity of arguments that were without merit.8

[15]     Mr Burgess has now applied for leave to appeal to the Supreme Court.

Mr Burgess’s renewed halt application

[16]     In this Court, Mr Burgess applies for an order under s 38 Insolvency Act

2006 halting the adjudication proceeding until such time as his leave application has been determined by the Supreme Court.  In his notice of application, Mr Burgess set out in six paragraphs a number of matters on which he submitted it is arguable that the Court of Appeal misdirected itself in law.  The result, he submits, is that there has been a miscarriage of justice.

[17]    Before me, Mr Burgess identified two particular areas of law which he submitted would realistically attract a grant of leave.

[18]     First, Mr Burgess submitted that there had been a miscarriage of justice because the Court of Appeal had failed to define the tort of malicious or reckless use

7      Burgess v Malley & Co, above n 3, at [141].

8 At [142].

of  civil  proceedings  and  had  thereby misdirected  itself.    He  submitted  that  the novelty of the tort involved would be a factor in favour of leave.

[19]     This aspect of Mr Burgess’s counterclaim arose from the fact that Malley & Co had commenced a proceeding against Mr Burgess for its fees while its right to do so was suspended by reason of Mr Burgess’s complaint over fees.

[20]     The Court of Appeal dealt with Mr Burgess’s cause of action in malicious

prosecution thus:9

[110]    Mr  Burgess  argues  Malley  &  Co’s  conduct  was  deliberate  and amounts to malicious prosecution.   We disagree.   We accept Mr Tait’s evidence it was simply an honest mistake and that any subsequent delay was attributable to disruption caused by the Christchurch earthquake in February

2011 and the file being referred to insurers as Malley & Co was required to do.   The counterclaim was in excess of $1 million and there was already

what  was later  described by the  Legal  Complaints Review  Officer as  a complex interlocking of Court and disciplinary conduct proceedings.

[111]    We note too that Mr Burgess has not been prejudiced in any way. The Legal Complaints Review Officer found that Mr Tait had not behaved in a dishonest manner over the matter and that the delay was attributable to a number of other factors, other than simply a failure on Mr Tait’s part.  He dismissed Mr Burgess’ complaint. We agree with those findings.

[21]     In short, Mr Burgess’s claim failed on the facts.  The evidence (accepted by the Court), was that there had been an honest mistake.   As with other causes of action, that relating to malicious prosecution was accordingly found by the Court of Appeal to have no merit.

[22]     Secondly, Mr Burgess focused on the quality of the expert evidence adduced by Malley & Co.  In response to Mr Burgess’s allegations of negligent advice and conduct, Malley & Co had called a specialist family law practitioner, Ms Manuel.

[23]     In its judgment, the Court of Appeal dealt with Mr Burgess’s attack on the

evidence of the expert witness thus:

9      Burgess v Malley & Co, above n 3.

Reliance on expert witness

[57]     In finding that Mr Tait carried out the work in a competent and professional manner, the Judge placed weight on opinion evidence given by a specialist family law practitioner, Ms Manuel.

[58]      On appeal, Mr Burgess contended the Judge was wrong to rely on this evidence.  Indeed Mr Burgess went further and submitted the evidence was not admissible.  The basis for that submission was that Ms Manuel had no knowledge of the oral advice given by Mr Tait to Mr Burgess.  She had failed to detail the advice on which her opinion was based and accordingly had failed to comply with the requirements of an expert witness under the code of conduct for expert witnesses.

[59]      According to Mr Burgess, Mr Tait’s evidence also suffered from the

same deficiency.  He did not know what advice he had given.

[60]     We do not accept these criticisms.   It is correct that Mr Tait was unable to recall all details of the advice he gave.   However, that is only understandable given the passage of time and the loss of his files as a result of the Christchurch earthquake in February 2011.   The incontrovertible evidence was that he and Mr Burgess met on a regular basis, had numerous phone calls and wrote to each other at critical points, not only about the memorandum but also during the course of the proceedings.   In our view, quite apart from Mr Tait’s evidence, there was ample written material including time sheets, correspondence and court documents to support Ms Manuel’s opinion and the Judge’s finding.

[24]     In his affidavit filed in this proceeding, Mr Burgess explains his grievance in relation to the findings on expert evidence in this way:

The expert witness called for Malley and Co … specifically gave evidence that she did not know what the oral advice given to me by Malley and Co was, and in response to my questions on cross-examination, was unable to show the Court where in her brief she set out the facts, or assumptions as to the  advice  given  by  Mr Tait,  nor  could  she  identify  a  single  document containing advice, that she had relied on…

Nowhere in the pleadings put before the Court, did Malley and Co identify the advice they claim to have given, or provide any details about the alleged advice.

[25]     The Court of Appeal’s judgment recognises that the inability of Mr Tait to recall all details of the advice he gave was understandable having regard to the passage of time and the loss of files.  The Court of Appeal also recognised that on critical points, including in relation to a memorandum of central importance, there had been regular contact and phone discussion between Mr Burgess and Mr Tait. Gendall J as trial judge, had found on the evidence that Mr Burgess had been fully informed as to the contents and implications of the memorandum, and had accepted

it without real question at the time.10    Hence the Court of Appeal’s conclusion that the established facts supported both Ms Manuel’s opinion and Gendall J’s finding that Mr Tait had carried out his work in a competent and professional manner.

[26]     In his submissions, Mr Burgess explained that he wished on further appeal to develop submissions in relation to the admissibility of expert evidence in such a case.  But, as both the High Court and Court of Appeal judgments indicate, the issues in relation to negligence turned on the facts and the application of settled law to those facts.  On the facts, the Court of Appeal also found this aspect of Mr Burgess’s appeal to be without merit.

Previous halt order

[27]     Mr Burgess previously (in May 2017) obtained the benefit of a halt order to give him time to achieve a determination of his appeal in the Court of Appeal.  As my judgment indicates, the halt order was granted on a fine balance.11    I recorded, “[b]ut for the pending hearing in the Court of Appeal on the legal costs/counterclaim judgment, I would have now adjudicated Mr Burgess bankrupt”.12

Balancing

[28]     Mr Burgess had in 2015/2016 the opportunity to establish his counterclaim but failed at trial.  That would normally have been sufficient to render inappropriate a halt of subsequent adjudication proceedings.  In the event, and solely because of an imminent Court of Appeal hearing, Mr Burgess had the benefit of a further halt.

[29]   To now grant yet a further halt would be entirely inappropriate in the circumstances of this case.  The creditor has had its entitlement to payment of the judgment  sum  for  almost  three  years.    Mr  Burgess  received the  opportunity to establish a counterclaim on two occasions notwithstanding the creditor’s entitlement

to payment of its judgment debt.

10     Malley & Co v Burgess, above n 2, at [43].

11     Malley & Co v Burgess, above n 5, at [75].

12 At [76].

[30]     If Mr Burgess is now adjudicated bankrupt (as he will be in that part of the judgment which follows), that decision will appropriately leave the immediate decision as to any further proceedings in the hands of the Assignee of Mr Burgess’s estate.

[31]     The  application  for  an  order  halting  the  adjudication  application  will therefore be dismissed.

The adjudication application

[32]     Ms Gaborieau and Mr Burgess addressed me in relation to the substance of the adjudication application.

[33]     Ms Gaborieau adopted the submissions made at the hearing in May 2017. Those submissions referred in particular to five factors relevant to adjudication.13   I concluded that it would have been appropriate to adjudicate Mr Burgess bankrupt but for the pending hearing in the Court of Appeal (to take place two months later).

[34]     At the hearing before me, Mr Burgess emphasised, as he had previously, what he submitted would be the pointlessness of adjudication.  He noted that the position adopted by Malley & Co on security for costs contained an assumption as to a lack of assets.   In fact, the interlocutory nature of an application for security for costs does not involve a definitive conclusion as to the party’s financial position.   The jurisdiction arises whenever there is reason to believe that a party will be unable to pay costs.

[35]     In the adjudication context, an argument that adjudication would be pointless needs to be clearly established on the facts if it is to carry any weight.  The evidence now before the Court  is  no  clearer than that  when  I previously considered  Mr Burgess’s “pointlessness” argument.  As then, I am not satisfied that Mr Burgess has established both that he is impecunious and that the Assignee would not under the Insolvency Act 2006 recover assets of some value or contributions by Mr Burgess to

his estate.14

13     Malley & Co v Burgess, above n 5, at [71].

14     At [67]–[70].

[36]     Mr Burgess emphasised to me the sincerity with which he has been pursuing his counterclaim.  He particularly took issue with Ms Gaborieau’s characterisation of his past conduct  as having involved  commercial or fiscal irresponsibility.   It is unnecessary here that the Court ascribe any such characterisation to Mr Burgess’s previous pursuit of litigation.  It is sufficient to say that the point has arrived where the Court would be unjustified in allowing any further deferral of adjudication.  I do not doubt the sincerity with which Mr Burgess has pursued litigation.   But, when issues have been repeatedly but unsuccessfully pursued, and found to rest on unmeritorious arguments, there is a public good in passing decision-making, as to further attempts to recover assets for the insolvent’s estate, to the Assignee.

Conclusion

[37]     Adjudication is appropriate.

[38]     The creditor seeks costs in terms of s 274(1)(b) Insolvency Act 2006.  That is

the creditor’s entitlement.

Orders

[39]     I order:

(a)       The    judgment    debtor’s   application    for   an    order    halting    the

adjudication application is dismissed.

(b)      The judgment debtor is adjudicated bankrupt.

(c)      The judgment debtor is  to pay the judgment creditor’s reasonable costs on a solicitor/client basis inclusive of and subsequent to the preparation and filing of the creditor’s application for adjudication, together with disbursements, with leave to the creditor and the Assignee to file memoranda in the event of disagreement as to the quantum.

(d)      This order is timed at 3.00 pm today.

Associate Judge Osborne

Solicitors:

Parker Cowan, Queenstown