McCollum v Thompson - [2020] NZHC 542

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001605

CIV-2018-404-001606 [2020] NZHC 542

UNDER the Insolvency Act 2006

BETWEEN

ALLAN ROY McCOLLUM, NANCY MARGARET McCOLLUM and TERENCE NEIL WALKER

Judgment Creditors

AND

DAVID JOHN THOMPSON and JOSEPHINE RUTH MACBETH

Judgment Debtors

Hearing: 17 February 2020

Appearances:

B D Gustafson for Judgment Creditors C J C McLean for Judgment Debtors

Judgment:

18 March 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

McCOLLUM v THOMPSON [2020] NZHC 542 [18 March 2020]

Introduction

[1] The judgment creditors (the McCollums) seek to have the judgment debtors (Thompson and MacBeth) adjudicated bankrupt following a failure to pay a High Court judgment debt in the sum of $105,752.76 plus interest and costs.

[2] Thompson and Macbeth are dairy farmers who defaulted on a term loan to the McCollums. That loan was secured by a general security agreement (GSA) over Thompson and MacBeth’s livestock. Receivers were appointed under the GSA in 2013 and lengthy litigation followed. That litigation included an appeal to the Court of Appeal in 2017.1

[3] In an earlier judgment dated 30 April 2019, I granted an order halting the bankruptcy proceedings for a three-month review period. The purpose of the halt was to enable Thompson and MacBeth to pursue genuinely triable cross-claims against the McCollums that might have impeached the judgment debt.

[4] In December 2019, Thompson and MacBeth filed proceedings against the McCollums in the District Court, contending that the McCollums:

(a)failed to account to them for the proceeds (milk income and progeny) from their livestock, the subject of the GSA; and

(b)pursuant to the provisions of the Personal Property and Securities Act 1999 (the PPSA), irrevocably elected to take the livestock in full satisfaction of the debt.

[5] The critical issue I must now determine is whether a further order halting the proceedings should be granted pending determination of the claim in the District Court, or whether Thompson and MacBeth should be adjudicated bankrupt. That issue depends on whether Thompson and MacBeth could have brought their PPSA claims in the High Court proceedings which gave rise to the judgment debt, as well as the prospects of the claims succeeding in the District Court.

1 McCollum v Thompson [2017] NZCA 269.

Factual background

[6] The factual background is set out at [14] – [29] of my earlier judgment of 30 April 2019.2

[7]Sufficiently for present purposes, a brief factual summary follows:

(a)The McCollums commenced proceedings to recover the shortfall owed under the GSA in August 2014. Thompson and MacBeth counterclaimed for the sale of stock at an undervalue and for the conversion of 47 heifers;

(b)The 47 heifers were the progeny of cows listed in the GSA and were part of what has become known as the Onion Road stock;3

(c)40 of the 47 heifers were pregnant at the time they were taken. In his High Court judgment of 28 January 2016, Lang J found that at the time the heifers…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McCollum v Thompson

Details

AGLC: McCollum v Thompson [2020] NZHC 542
Case: [2020] NZHC 542
Decision Date: 18 March 2020

CaseChat Overview and Summary

The judgment creditors, Allan Roy McCollum, Nancy Margaret McCollum, and Terence Neil Walker, sought to have the judgment debtors, David John Thompson and Josephine Ruth MacBeth, adjudicated bankrupt for their failure to pay a High Court judgment debt of $105,752.76 plus interest and costs. The judgment debtors, who are dairy farmers, defaulted on a term loan secured by a general security agreement over their livestock. The critical issue for the court to determine was whether to grant a further order halting the bankruptcy proceedings pending the determination of the judgment debtors' cross-claims in the District Court, or to proceed with the adjudication of bankruptcy. The court had to consider whether the judgment debtors could have brought their Personal Property Securities Act 1999 (PPSA) claims in the earlier High Court proceedings and the prospects of those claims succeeding in the District Court.

The court found that both causes of action in the District Court proceedings could have been brought in the earlier High Court proceedings. However, the judgment debtors did not raise those claims at that time. Furthermore, the court found that the judgment debtors' claims in the District Court were unlikely to succeed, as there was no reasonable prospect that the quantum of damages they might obtain would meet or exceed the outstanding judgment debt. The court also found that the failure of the judgment debtors to raise the claims in the earlier High Court proceedings constituted an abuse of process. Given the lack of prospects of success and the abuse of process, the court decided not to grant a further stay of proceedings.

The court made the following orders: unless the judgment debtors paid the sum of $105,752.76 into the trust account of the judgment creditors' solicitors by 12 noon, 31 March 2020, both judgment debtors would be adjudicated bankrupt. If the funds were paid, the adjudication proceedings would be halted pending the determination of the proceedings in the District Court. In the event that the security was not paid, the proceedings would be called in the Bankruptcy List for orders for adjudication and costs to be made in open court.

Orders