McKay v Johnson
[2016] NZHC 410
•10 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2511 [2016] NZHC 410
UNDER Part 19 of the High Court Rules and
section 34 of the Receivers Act 1993
IN THE MATTER
of H.B. Garments Limited (in Liquidation and in receivership) and HAD Garments Limited (in liquidation and in receivership)
BETWEEN
ANDREW JOHN MCKAY Applicant
AND
CLIVE ASHLEY JOHNSON First Respondent
GEOFF MARTIN SMITH Second Respondent
Hearing: 10 March 2016 Appearances:
R B Stewart QC and J Caird for the Applicant
First Respondent discontinued
Second Respondent in personJudgment:
10 March 2016
ORAL JUDGMENT OF MUIR J (Application for leave to file affidavit out of time)
Counsel:
R B Stewart QC, Barrister, Auckland
Solicitors:
J C Caird, Simpson Grierson, Auckland
Copy to: Second Respondent
MCKAY v JOHNSON & SMITH [2016] NZHC 410 [10 March 2016]
[1] Mr Smith applies for leave to file an affidavit in opposition to the liquidator’s compensation claims. Such affidavit, which was substantial and accompanied by in excess of 20 exhibits, was filed with this Court at 4.04 pm on the eve of the trial.
Background
[2] The background is conveniently recorded in the decision of Whata J dated
2 March 2016 (for which reasons followed1).
[3] For present purposes I need refer only to the orders made by Toogood J on 9
November 2015 and the subsequent orders made by Duffy J on 17 December 2015.
[4] When the matter came before Toogood J on 9 November it was in the context of a hearing allocated later that month. The applicant had settled against the first respondent and both the applicant and the second respondent sought to adjourn the hearing.
[5] The orders made by Toogood J required, inter alia, that Mr Smith was to file and serve any further affidavits by 5 pm on 2 December 2015.
[6] The order also recognised in [3(c)] Mr Smith’s consent to the applicant obtaining copies of all bank accounts with the Bank of New Zealand (BNZ) in the name of the relevant companies, Geoff Smith Liquidations Limited, or similar account names. The liquidator had previously identified the absence of such information as frustrating his attempts adequately to quantify his claims against Mr Smith. Access to those documents was subsequently given.
[7] When the matter came before Duffy J on 17 December 2015 she made orders relevant both to Mr Smith’s intended challenge to the inspection orders made by Brewer J on 10 December 2015 and in respect of the substantive (monetary) claims. She ordered that the “forensic expert’s report” and the evidence of Mr McKay (which I take to be a reference to evidence emerging from consideration of the BNZ accounts), be filed and served by 5 pm on 5 February 2016. She further ordered that
Mr Smith was to file his affidavit evidence “in response (if any)” (which must be
1 McKay v Johnson [2016] NZHC 357.
intended to be a reference to any response either to the forensic expert’s report or Mr
McKay’s evidence), by 5 pm 19 February 2016.
[8] Mr McKay complied with that timetable, filing an extensive affidavit and exhibits in which he expressed the conclusion that $540,666.82 was properly owing to the receivers by Mr Smith. This was significantly more than he had previously claimed was owing.
[9] Mr Smith did not file any affidavit addressing Mr McKay’s evidence within the time limit prescribed by Duffy J. He did file affidavits in relation to his intended challenge of the inspection order as provided for in a subsequent timetable order made by Whata J on 2 March 2016 but did not do so in respect of the substantive dispute until 9 March 2016. The orders of Whata J did not specifically address any delayed timetable for a response to Mr McKay’s 5 February 2016 affidavit. The only relevant timetable remained that of Duffy J.
[10] He says that he was unaware that he was bound by the 19 February 2016 timetable order in respect of evidence going to the substantive dispute. Whatever the merits of that position, he now says that he has a substantial defence to the receiver’s claim and the interests of justice require that the court have before it all material relevant to that defence. He says that his affidavit of 9 March 2016 represents the best evidence he was able to put before the Court at that time but there is still significant work to be done in analysing the approximately 20,000 transactions which form the basis of the applicant’s revised claim.
[11] On behalf of the receiver Mr Stewart QC takes what is in my view a responsible course. He recognises that the claim against Mr Smith is substantial and he fairly acknowledged that, absent material contained in the affidavit of 9 March
2016, there was no evidentiary foundation for Mr Smith’s suggested defence. In particular, to the extent that Mr Smith says that he is not liable because the receipts in question derive from the use of assets which were not subject to the charge in favour of Westpac, there is no adequate foundation elsewhere in the evidence. Nor does his evidence otherwise address the revised quantum (to the extent Mr Smith says that was even possible by 9 March 2016).
[12] Mr Stewart further submitted that were the affidavit to be received in evidence, it was inevitable the matter would need to be adjourned part heard. Mr McKay is not currently available to consider the affidavit and respond. Indeed, his evidence was taken last week before the Registrar for that very reason. Mr Stewart has only been able to have very preliminary discussion with Mr McKay but such was sufficient for him to advise that a reply affidavit would undoubtedly be required from him were Mr Smith’s latest affidavit admitted.
[13] He says in that event the Court should adjourn the matter part heard to come back before me at a time which allows all outstanding matters of evidence to be addressed. He seeks costs in that context.
[14] Mr Smith seeks an indulgence from the Court. The administration of justice is significantly compromised by litigants who fail to meet timetable orders and who attempt to file affidavits which can only reasonably be responded to with an adjournment. This matter has a somewhat desultory history and Mr Smith’s failure to abide by the orders of Duffy J has only compounded that problem. Although the orders of Whata J addressed only evidence in relation to the application to rescind the inspection order, I cannot accept that there was any genuine basis of confusion in terms of what the orders of Duffy J required. Nevertheless, as Mr Stewart conceded, the Court cannot allow the efficient administration of justice to trump the overall interests of justice. The claim against Mr Smith is substantial. A significant injustice could result if the receiver’s claims were ultimately found to be exaggerated or untenable. For those issues to be properly ventilated there needs to be an adequate evidential foundation. Mr Smith says that is provided by his latest affidavit and the ongoing “accounting” analysis he is undertaking.
[15] With some reluctance therefore I grant leave to Mr Smith to file his affidavit dated 9 March 2016. As Mr Stewart recognised, this has the inevitable effect of resulting in an adjournment of this case part heard.
[16] In relation to further evidence which Mr Smith considers may be necessary, he seeks four weeks to file the same. I allow three on the basis that he has already had the receiver’s affidavit for in excess of a month.
[17] Accordingly, I make the following timetable orders:
(a) Any further affidavits by Mr Smith in opposition to the receiver’s
claims for compensation are to be filed and served by 4.30 pm on
31 March 2016. The Court will not entertain any evidence filed by
Mr Smith beyond that date.
(b) Any reply affidavits by the receiver are to be filed and served by 21
April 2016.
(c) The receiver is to file and serve his updated synopsis of argument in relation to the compensation claim by 5 May 2016.
(d)Mr Smith is to file and serve his synopsis of argument in relation to the compensation claim by 12 May 2016.
(e) This matter is to be allocated a further fixture (one day) before me on the first available dated after 16 May 2016.
Costs
[18] Mr Stewart applies for costs in the amount of $3,000. His application is, in my view, unanswerable. This fixture has been effectively “hijacked” by a last minute filing only permitted because of my concern about the overall interests of justice on what is a substantial claim against an unrepresented litigant. It is inevitable that the applicant will sustain significant additional legal costs arising out of the adjournment. Delay and cost go hand in hand.
[19] In my assessment an award of costs in the sum of $2,500 fairly meets the consequences of the adjournment. Because of the history of these proceedings and my concerns that these may not be paid absent appropriate incentives, an “unless” order is in my view appropriate.
[20] Accordingly, unless the said sum of $2,500 is paid to the applicant’s solicitors, Simpson Grierson, Auckland, by 28 April 2016 the second respondent is to be debarred from further defence of the applicant’s claims.
[21] Mr Caird is, within 24 hours, to supply Mr Smith with relevant banking details for remittance of that sum.
Settlement
[22] At the conclusion of his submissions in relation to admission of the affidavit evidence Mr Stewart stated his willingness to discuss with Mr Smith whether in light of that evidence, any resolution of the claims was possible. I encourage such discussions. For the avoidance of doubt none of the timetable or other orders made
by me are to be regarded as suspended on account of them.
Muir J