McLean v New Zealand Insolvency and Trustee Service
[2020] NZCA 642
•14 December 2020 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA301/2020 [2020] NZCA 642 |
| BETWEEN | DOUGLAS WAYNE FRASER McLEAN |
| AND | THE NEW ZEALAND INSOLVENCY AND TRUSTEE SERVICE, AS OFFICIAL ASSIGNEE IN THE BANKRUPTCY OF THE PROPERTY OF ROBERT RITCHIE MARSHALL |
| Court: | Brown and Gilbert JJ |
Counsel: | Applicant in person |
Judgment: | 14 December 2020 at 11.00 am |
JUDGMENT OF THE COURT
The application for an extension of time to appeal is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Brown J)
Introduction
Mr McLean filed an appeal in the High Court under s 226 of the Insolvency Act 2006 concerning the administration by the New Zealand Insolvency and Trustee Service (the respondent) of the estate of a bankrupt who was significantly indebted to Mr McLean. His appeal was dismissed on account of his failure to comply with an order to pay security for costs. He did not file an appeal within the prescribed period. His application to this Court for leave to bring an appeal out of time under r 29A of the Court of Appeal (Civil) Rules 2005 filed on 8 June 2020 and amended on 7 September 2020 was not served on the respondent until 14 September 2020. The application is opposed by the respondent.
Relevant background
Mr McLean was a creditor of the bankrupt estate of a person adjudicated bankrupt on 30 August 2016 and discharged on 30 August 2019. He was the most significant creditor consequent upon lengthy litigation in which he obtained a series of judgments against the bankrupt between 2014 and 2016.
During the administration of the estate the respondent had cause to believe the bankrupt had made a series of potentially insolvent gifts involving the bankrupt’s family trust (the Trust). Upon receipt of a settlement offer from the Trust, the respondent voluntarily consulted with Mr McLean about the offer, inviting him to provide funding if he wished litigation to be brought against the Trust. Mr McLean did not agree to provide the necessary funding. On 18 March 2019 the settlement offer made by the Trust was accepted on a conditional basis, namely that the respondent recorded the settlement was subject to a right of appeal under s 226 of the Insolvency Act and would therefore be conditional for 15 working days until the time had expired for Mr McLean to appeal.
On 9 August 2019 Mr McLean filed his appeal under s 226 but did not serve the respondent until 10 September 2019. He sought a waiver of security for costs on the grounds that he was unable to pay security and that his appeal involved a significant issue of public interest.
Following a telephone conference on 11 November 2019, in a minute dated 15 November 2019 (the first minute) Powell J ruled that it was not possible to conclude that the merits of the appeal favoured the waiver of security.[1] The Judge directed that security for costs was to be paid by Mr McLean in the sum of $2,350 by 29 November 2019, failing which the appeal would stand dismissed.
[1]McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460, 15 November 2019 (Minute No 1).
Mr McLean filed a memorandum in response to the first minute, proposing that security be provided in the form of his motor vehicle rather than by a money payment. In a second minute dated 25 November 2019 Powell J directed that security remained payable but that the respondent was to advise if it was prepared to take security over Mr McLean’s motor vehicle in lieu of payment of security.[2] The respondent declined to accept that proposal.
[2]McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460, 25 November 2019 (Minute No 2).
The issue of security was revisited again in a third minute dated 3 December 2019.[3] Relevantly the minute stated:
[2] Following the second minute, Mr McLean emailed the Registry seeking details of the account that the security was to be paid into. Unfortunately Mr McLean’s query was not able to be addressed until after the last date for payment of security had passed. In the meantime however, seeking to preserve his position Mr McLean arranged to pay the security ordered into his solicitor’s trust account, which he did prior to the expiry of the deadline.
…
[4] The nature of the direction issued on 15 November 2019 is that unless the direction was complied with the appeal is dismissed from the date specified. As a result, as security was not in fact paid as directed, the appeal was therefore dismissed from the point of non-payment.
[5] In this case however it is clear there was a supervening circumstance, namely Mr McLean’s query to the Registry as to the mechanics of paying the security into Court, and in the absence of a reply, the payment made to Mr McLean’s solicitors. Accordingly, given those circumstances, while the appeal was dismissed, I am satisfied that the interests of justice require the appeal to be reinstated subject to Mr McLean taking immediate steps to complete payment of security into Court.
[3]McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460, 3 December 2019 (Minute No 3).
The Judge made orders reinstating Mr McLean’s appeal and directing that security in the sum of $2,350 was to be paid into Court by Mr McLean on or before 6 December 2019. In the event that security was not paid by that date, the appeal would stand dismissed.
Mr McLean did not pay security for costs by 6 December 2019. On 8 December 2019 he filed a memorandum which was referred to by Powell J in his fourth minute dated 11 December 2019 as follows:[4]
[2] I am now in receipt of a memorandum received from Mr McLean. Mr McLean advises the Court that he has chosen not to pay security by the date specified. He has explained that the reason he did not do so was that he was unable to get an assurance that the security would be repaid in full, if he chose not to proceed with his appeal after the Official Assignee had filed and served its evidence in relation to the relevant decisions that it made, which was due to be filed on 13 December 2019.
The Judge then commented:
[4] With respect to Mr McLean, it was not possible for the Registry staff to provide him with any assurance that security for costs on the appeal, once paid, would be returned in full at any point. The reason for this is that the Official Assignee has no doubt already incurred costs on this appeal and further costs would inevitably be incurred in the production of the Official Assignee’s evidence. As a result, any subsequent decision by Mr McLean to discontinue the appeal after the filing of the Official Assignee’s evidence would be subject to any application for costs made by the Official Assignee against the security already paid.
[4]McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460, 11 December 2019 (Minute No 4).
The minute recorded that Mr McLean’s appeal was dismissed as from 7 December 2019 and indicated the preliminary view that costs on the appeal should lie where they fell.
On 11 March 2020 Mr McLean filed an application for judicial review in the High Court at Auckland citing “the Crown, the Auckland High Court” as respondent. In a minute dated 12 May 2020 Palmer J dismissed the proceeding for the reason that decisions of the High Court cannot be subject to judicial review in the High Court. He explained that the appropriate course of action if a litigant disagrees with a High Court decision is for the litigant to appeal the decision.
The application for an extension of time to appeal
By this point the time for appealing the dismissal of the s 226 appeal had expired. On 8 June 2020 the applicant filed in this Court an application for leave to bring an appeal out of time naming “the Crown, Auckland High Court” as respondent. In a minute dated 2 September 2020 Mr McLean was directed to file an amended application naming as the correct respondent the New Zealand Insolvency and Trustee Service. An amended application was filed on 7 September 2020 which was served on the respondent on 14 September 2020.
The amended application specifically relates to an appeal against the fourth minute recording that the s 226 appeal was dismissed. By implication, we take it as an application to appeal the directions in the third minute under which the appeal was dismissed.
In his amended application for an extension of time to appeal Mr McLean detailed his criticisms of the High Court direction to pay security for costs, alleging error by the Judge in failing to give any credence to the asserted public interest and to accept his criticisms of the respondent for its alleged breaches of its obligations. Mr McLean alleged that the Court did not act fairly or equitably and displayed little empathy to him, noting that he had been seeking justice for some seven years. He also explained the delay as arising from the erroneous procedural steps which he took as recited above.
In addition to the amended application this Court has received and considered the following documents:
- memorandum of counsel for the respondent in opposition filed 5 October 2020;
- affidavit of R G McDonald on behalf of the respondent dated 5 October 2020;
- memorandum of Mr McLean in support of application filed on 21 October 2020;
- memorandum of Mr McLean filed on 12 November 2020; and
- submissions of counsel for the respondent filed on 13 November 2020.
Mr McLean suggested that he should be afforded the opportunity to file fresh evidence in response to Mr McDonald’s affidavit. However that affidavit primarily recited the procedural history, filling the void in Mr McLean’s application. We do not consider that further evidence is required on the question for determination on the present application.
Relevant principles
The principles applicable to applications for extensions of time under r 29A were explained by the Supreme Court in Almond v Read.[5]The ultimate question when considering the exercise of the discretion is what the interests of justice require. Factors identified as likely to require consideration include:[6]
(a)the length of delay;
(b)the reasons for delay;
(c)the conduct of the parties, particularly the applicant;
(d)any prejudice or hardship to the respondent or to others with a legitimate interest in the outcome; and
(e)the significance of the issues raised by the proposed appeal, both for the parties and more generally.
[5]Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.
[6]At [38].
While the Court recognised that the merits of a proposed appeal may, in principle, be relevant for the exercise of the discretion to extend time, a decision to refuse an extension of time based substantially on that ground should be made only where the appeal is clearly hopeless. The lack of merit must be readily apparent.[7]
Discussion
[7]At [39].
Mr McLean’s delay in filing the application for an extension of time to appeal is significant. It was compounded by the fact that the application did not name the appropriate party as respondent. Hence the respondent did not become aware of the intended application until approximately nine months after the appeal to the High Court was dismissed.
In substantial part the delay has occurred because Mr McLean has proceeded without the benefit of legal advice and, in consequence, has made a number of procedural errors. The respondent responsibly does not take issue with the delay attributable to the error in seeking to challenge the security for costs decision by way of a judicial review proceeding in the High Court. However it does take issue with the 28 working day delay between the time for filing an appeal and the date on which the judicial review application was filed. It observes that a further 18 working days elapsed after the judicial review application was struck out before Mr McLean filed his initial extension of time application.
While some allowance must be made to Mr McLean as a lay litigant, the errors in filing a judicial review application and in failing to name (and hence serve) the correct respondent in the extension application were fundamental errors which resulted in several months elapsing.
The respondent contends that Mr McLean’s conduct is relevant, noting his history of delay, particularly in the context of the s 226 appeal. The various complaints made by Mr McLean throughout the administration of the estate culminated in the respondent voluntarily commissioning an external review by an independent barrister which confirmed that the decision to accept a settlement was commercially sensible.
The length of the delay and the conduct of Mr McLean have implications in this case for the prejudice which would be suffered by the respondent if an extension of time to appeal was granted. In Almond v Read the Supreme Court observed that the greater the prejudice, the stronger the case will need to be to justify the grant of an extension of time. It stated that where there is significant delay coupled with significant prejudice, then it may well be appropriate to refuse leave even though the appeal appears to be strongly arguable.[8]
[8]At [38(d)].
The respondent emphasises that it proceeded to administer the estate on the basis that the s 226 appeal was dismissed. This included fully and finally settling the claim against the Trust and closing the estate. The bankrupt has been discharged and there are no further assets to be recovered in the estate. The point is made that these acts, undertaken in reliance on the absence of any appeal, involve third parties and cannot be unwound. It is also observed that Mr McLean’s financial hardship stems from his business dealings with the bankrupt, not from the actions of the respondent.
Mr McLean maintains that there would be a considerable public interest for many other persons if findings were made that the respondent had “abused”, “misled”, “failed to account”, “reneged from undertakings”, and failed to abide by the State Services Commission Code of Conduct. However we agree with the respondent’s submission that Mr McLean’s criticisms of the administration of the particular bankrupt estate do not elevate the case to one of public interest. Rather the issues raised by Mr McLean are private concerns primarily affecting him as the most significant creditor in the estate. The proposed appeal does not appear to raise any discernible question of law. By contrast, as the respondent submits, there is a significant public interest in ensuring the efficient administration of bankrupt estates and in providing finality in litigation.
The respondent also submits that the proposed grounds of appeal are hopeless and cannot possibly succeed. However as noted above the Supreme Court made it clear that the decision to refuse an extension of time substantially on the ground of lack of merit of a proposed appeal should be made only where the appeal is clearly hopeless. Nevertheless it is relevant in the present case to make some assessment of the strength of the proposed appeal in weighing the significance of prejudice to the respondent as a factor.
On an appeal to the High Court it is mandatory to order security for costs under r 20.13(2) of the High Court Rules 2016 unless the Judge considers that it is in the interests of justice that no security be required. We do not consider that there was any demonstrable error on the part of the Judge in considering that issue. Furthermore it is apparent that Mr McLean was in a position to pay security. Indeed as noted at [7] above the fact that he had paid the amount of security into his solicitor’s trust account was the reason why Powell J reinstated his appeal. In order to avoid the risk of the security being called on, Mr McLean then made a conscious decision not to comply with the Judge’s direction.
Weighing these several factors, recognising the delay having been caused substantially by procedural mis-steps by a self-represented litigant but also acknowledging the clear prejudice for the respondent consequent on an extension of time to appeal at this juncture, we conclude that it is inappropriate to grant an extension of time to appeal in the present case.
Result
The application for an extension of time to appeal is dismissed.
Solicitors:
Anderson Lloyd, Christchurch for Respondent
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