Mason v Probst

[2012] NZHC 760

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV 2011-488-605 [2012] NZHC 760

IN THE MATTER OF     the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of Colin Austin Probst

BETWEEN  JAMES WILLIAM  MASON Creditor

ANDCOLIN AUSTIN PROBST Debtor

Hearing:         23 April 2012

Appearances: T Savage for creditor

D Grindle for debtor

Judgment:      23 April 2012

ORAL JUDGMENT OF GILBERT J

Solicitors:           Ulrich McNab Kirkpatrick, Whangarei:  [email protected]

Webb Ross, Whangarei:  [email protected]

MASON V PROBST HC WHA CIV 2011-488-605 [23 April 2012]

[1]      The  judgment  creditor,  Mr  Mason,  applies  for  an  order  adjudicating  the judgment debtor, Mr Probst, a bankrupt.   There is no dispute that Mr Probst has committed an available act of bankruptcy having failed to comply with a bankruptcy notice served on him.  Mr Probst opposes the application on the grounds set out in s 37(b), (c) and (d) of the Insolvency Act 2006.

Background

[2]      Mr Probst formerly leased premises from Mr Mason from which he operated his photographic studio.   Mr Probst vacated the premises owing money under the lease to Mr Mason.  Mr Mason erected a sign on the road frontage indicating that Mr Probst’s business had closed.

[3]      Mr  Probst  issued  proceedings  in  the  Whangarei  District  Court  claiming damages in defamation as a result of what Mr Mason stated on the sign.  Mr Mason counterclaimed for monies due to him under the lease.

[4]      The proceedings were heard over a two day period.  Judgment was given by Judge McElrea on 6 May 2011.   Both parties succeeded to some extent on their claims but the judgment in favour of Mr Mason exceeded the amount awarded to Mr Probst on his claim.  The differential was $9,142.   Mr Probst says that he has arranged funding from the bank that will enable him to pay this sum by the end of this month.

[5]      Judge  McElrea  dealt  with  the  issue  of  costs  in  his  judgment  at  [57]  as follows:

I am not prepared to award the defendant [Mr Mason] legal costs on its recovery attempts because both sides have been proved partly wrong in the various claims, or counter-claims, and the issue of costs is too murky for that to occur.   Costs, however, may be awarded on the final balance of these proceedings.

[6]      Mr Probst represented himself in the District Court and says that he was unsure what the Judge meant by [57] of the judgment.  He was not asked to make submissions on costs and did not do so.  Costs were subsequently fixed in the sum of approximately $20,000.  Mr Probst considers that no costs order should have been

made because both parties succeeded on their claims, at least to some extent.  In any event  he considers that  the costs  for which  judgment  has  now been  sealed  are excessive.

[7]      Mr Probst was outside the time limit for appealing by the time he obtained legal advice and the grant of legal aid.  He applied for leave to appeal out of time but this application was dismissed.

[8]      Mr Probst persists with his belief that he should not have to pay costs to Mr Mason.   Through his counsel, Mr Probst has proposed that an order be made quashing the costs order and directing that costs lie where they fall or that some other order for  costs  be substituted.    Mr Grindle acknowledged  that  I have no jurisdiction to make any such order on the application before me.

[9]      This is the immediate background to the current application.   Mr Mason wants the money he is owed under the judgment.  Mr Probst is still having difficulty accepting that he should have to pay costs despite the fact that the issue of costs has now been finally determined.

Legal principles

[10]     The legal principles  are well settled and do not need to be  restated.   A judgment creditor is not automatically entitled to an order for adjudication merely because there has been an available act of bankruptcy. The court may, in the exercise of its discretion, decline to make an order if the debtor is able to pay his debts or if it is otherwise just and reasonable not to make an order.   However, where the requirements set out in s 13 of the Act have been complied with, as is the case here, the judgment debtor must show why an order should not be made.

[11]     The bankruptcy process enables the bankrupt’s estate to be managed for the benefit of the bankrupt’s creditors.   It allows bankrupt persons the opportunity of freeing themselves of the debts that led to the bankruptcy.   Bankruptcy is not a procedure for collecting debts from solvent persons.

Discussion

[12]     Mr  Probst  is  64  years  old.    He  owns  a  property in  Old  Onerahi  Road, Whangarei, which has a first mortgage to ASB Bank Limited securing a debt of some $37,000.  A recent valuation carried out by Quotable Value for rating purposes values the property at $375,000.  Mr Probst is currently trying to sell this property.  It went to auction on 16 February 2012 but no bids were received.  It remains listed for sale.

[13]     Mr Probst is still operating his photographic studio business and earning an income from doing so.  Apart from the modest mortgage to ASB and the judgment debt, Mr Probst has no debts over $1,000.   His assets are more than sufficient to meet  all  of  his  liabilities.    There  is  nothing  to  prevent  the  judgment  creditor, Mr Mason, obtaining payment of the judgment debt in full including interest and the costs of any required enforcement process.   Mr Savage responsibly acknowledged this.

[14]     While I can understand Mr Mason’s frustration that he has not yet been paid, I consider that the bankruptcy process is not the appropriate response in this case. There are no other significant unsecured creditors.   No other creditor has filed a notice supporting the current application.  Mr Probst is able to pay his debts.  I do not consider that the public interest will be served by adjudicating Mr Probst bankrupt.   I do not consider that it is just and equitable to make an order for his adjudication in the circumstances of this case.

Result

[15]     The application is dismissed.

[16]     Mr  Grindle  submitted  that  costs  should  follow  the  event.    Mr  Savage submitted that costs should lie where they fall.   He submitted that the application was brought in good faith and he pointed out that Mr Mason has been waiting for payment for some considerable time.

[17]     The question as to whether to award costs, and if so, on what basis, is of course a matter of discretion.   In this case, I consider that the discretion is appropriately exercised by ordering costs on a 2B basis in favour of Mr Probst in relation to the current application.  Those costs will cover the steps and attendances

undertaken by Mr Grindle on his behalf, not the steps that preceded his involvement.

M A Gilbert J