Michael Wilson & Partners Limited v Sinclair
[2020] NZHC 2546
•29 September 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-157 CIV-2020-485-158 CIV-2020-485-159 CIV-2020-485-160
[2020] NZHC 2546
UNDER the Insolvency Act 2006 IN THE MATTER
of bankruptcy proceeding
BETWEEN
MICHAEL WILSON & PARTNERS LIMITED
Judgment Creditor/Respondent
AND
THOMAS IAN SINCLAIR
Judgment Debtor/Applicant
Hearing: 15 September 2020 Appearances:
K Sullivan for judgment creditor/respondent J Dallas for judgment debtor/applicant
Judgment:
29 September 2020
Reissued:
27 October 2020
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[1] The judgment creditor, Michael Wilson & Partners Ltd, secured four (costs) judgments against the judgment debtor, Mr Thomas Sinclair, in foreign jurisdictions. These have now been registered as judgments here. At first instance, the company’s application to this Court for registration was declined.1 It appealed and this Court’s judgment was overturned by the Court of Appeal.2
1 Michael Wilson & Parties Ltd v Sinclair [2016] NZHC 835.
2 Michael Wilson & Parties Ltd v Sinclair [2016] NZCA 376; (2016) 23 PKNZ 692.
MICHAEL WILSON & PARTNERS LIMITED v SINCLAIR [2020] NZHC 2546 [29 September 2020]
[2] Although the judgments were registered and thus became enforceable in this country some time ago, Michael Wilson Partners has only recently served bankruptcy notices pursuant to s 29 of the Insolvency Act 2006. This follows other enforcement processes to which I will refer later in this judgment. In any event, Mr Sinclair applied for an order setting those bankruptcy notices aside. In a judgment dated 24 July 2020 I dismissed that application. Michael Wilson & Partners then commenced these (four) proceedings for orders adjudicating Mr Sinclair bankrupt on the basis of his failure to comply with the terms of the bankruptcy notices.
[3] Mr Sinclair has appealed from my judgment to the Court of Appeal, and now seeks an order staying Michael Wilson & Partners’ applications, essentially on the ground that they should await the outcome of his appeal.
[4] Although Mr Sinclair’s application dated 28 July 2020 refers only to r 20.10 of the High Court Rules 2016, the case was argued on his behalf by Mr Dallas — without objection from Mr Sullivan — on the basis that it was made pursuant to that rule or s 38 of the Insolvency Act, under which the Court has jurisdiction to halt adjudication proceedings.
[5]Rule 20.10 provides:
20.10 Stay of proceedings
(1)An appeal does not operate as a stay—
(a)of the proceedings appealed against; or
(b)of enforcement of any judgment or order appealed against.
(2)Despite subclause (1), the decision-maker or the court may, on application, do any 1 or more of the following pending determination of an appeal:
(a)order a stay of proceedings in relation to the decision appealed against:
(b)order a stay of enforcement of any judgment or order appealed against:
(c)grant any interim relief.
(3)An order made or relief granted under subclause (2) may—
(a)relate to enforcement of the whole of a judgment or order or to a particular form of enforcement:
(b)be subject to any conditions for the giving of security the decision-maker or the court thinks just.
[6]Section 38 of the Insolvency Act provides:
38 Court may halt application
(1)The court may at any time halt the creditor’s application for adjudication.
(2)The court may halt the application on the terms and conditions (if any), and for the period, that the court thinks appropriate.
[7] As counsel’s submissions demonstrated there is any amount of authority as to the application of both r 20.10 and s 38.
[8] In ordinary proceedings, the general principle is that the successful party is entitled to the fruits of his, her or its judgment, and an application for a stay of execution will only be successful where the particular circumstances of the case would render enforcement unjust. However, in insolvency proceedings, in which the bankruptcy of an individual is sought, the general drift of the authorities is that the Court is more inclined to consider favourably an application that the proceeding be halted until an appeal is disposed of. This no doubt reflects the finality of insolvency proceedings. As a rule, if an individual is adjudicated bankrupt, there is no coming back from that.
[9] In any event, both r 20.10 of the High Court Rules and s 38 of the Insolvency Act confer on the Court a broad, flexible discretion and, irrespective of the nature of the litigation involved, the considerations that are invariably brought to account in making a determination include (but are not limited to):
(a)the history of the litigation and the conduct of the parties in the same;
(b)the impression that the court can gain of the merits of the appeal;
(c)the stage reached in the appeal and any information to hand as to when it may be disposed of;
(d)the relative consequences for both parties of making or refusing the order sought;
(e)any known consequences for third parties.
[10] No doubt there are other issues which arise on the facts of particular cases. And, as Lang J said in Re Wright, ex parte Health Distributors Ltd, context is everything – some factors will assume greater importance than others depending on what is at issue.3
History of litigation and conduct of parties
[11] In my judgment declining the judgment debtor’s application for an order setting aside the bankruptcy notices served by the Judgment Creditor, I touched on the history of the litigation that has followed a dispute between those involved with Michael Wilson & Partners well over a decade ago. It has involved the most extraordinary amount of litigation in the United Kingdom and in several other jurisdictions. The conduct of all the participants has been described as disgraceful in a number of English judgments. Mercifully, New Zealand has not been a major forum for this. The litigation here has been a mere side show, and occurred only because Mr Sinclair, who is one of the individuals involved, owns property here.
[12] For a detailed description of the broader background I refer to the judgment of his Honour Judge Pelling QC in Michael Wilson & Partners Ltd v Sinclair and Ors.4
[13] The broader history of the Michael Wilson & Partners litigation is not irrelevant, but of more immediate importance is the history of the enforcement proceedings being pursued by the firm against Mr Sinclair in this country.
[14] As to that, and to recapitulate, Michael Wilson & Partners applied to register the four foreign judgments which are reflected in these four proceedings in 2015. In this Court, its applications were declined. The company appealed to the Court of Appeal. The Court of Appeal overturned this Court’s judgment and registered the
3 Re Wright, ex parte Health Distributors Ltd HC Hamilton Civ-2010-419-121, 5 November 2010 at [13].
4 Michael Wilson & Partners Ltd v Sinclair and Ors [2020] EWHC 1249.
judgments. Then, Michael Wilson & Partners sought to enforce the judgments by execution over a Wellington residential property owned by Mr Sinclair. The net result of that process was the sale of the property. The proceeds of that sale are being held in the trust account of a firm of solicitors, and there is ongoing litigation in which Michael Wilson & Partners is seeking the release of those funds. Those funds are only a fraction of the amount of the four judgments and in April of this year Michael Wilson & Partners served bankruptcy notices on Mr Sinclair in relation to those judgments. Mr Sinclair applied to set those bankruptcy notices aside. In my judgment of 24 July 2020 I declined those applications. Mr Sinclair has appealed from my judgment.
[15] I see nothing in the conduct of the New Zealand litigation to criticise. Both parties have taken every available step in pursuing and defending the claims, but that is their entitlement. The litigation has been conducted, through their respective solicitors and counsel, perfectly properly.
[16] I regard the history of the New Zealand litigation and the conduct of the parties therein as a neutral factor in considering the application now before the Court.
The merits of the appeal
[17] In the context of an application such as this, the Court is not in a position to reach any definitive views as to the merits of the appeal. Indeed, the Court must exercise caution and avoid trespassing into areas that are the domain of the appellate court.5 That said, the Court is obliged to reach a view, even if it is little more than an impression.
[18] It may be helpful to begin with a brief recitation of the essential basis for Mr Sinclair’s application pursuant s 38 of the Insolvency Act.
[19] One aspect of the Michael Wilson & Partners dispute was — pursuant to a submission to arbitration apparently contained in the agreement governing the company’s internal management — has played out in long running arbitral proceedings in London. The primary litigants were and are the company and a Mr Emmott. I am informed, and judgments emerging from satellite litigation in the
5 Re Wright, ex parte Health Distributors Ltd, above n 1, at [20].
United Kingdom and elsewhere confirm this — that Mr Emmott, for reasons which it is not necessary to describe, was financially embarrassed in terms of his ability to fund his defence in those arbitral proceedings. It seems that Mr Emmott approached Mr Sinclair for assistance. Mr Emmott and Mr Sinclair entered into an arrangement pursuant to which Mr Emmott’s defence in the arbitral proceedings — or in whole or in part — would be funded by Mr Sinclair on certain terms. The nature of these terms were very much in issue in the context of Mr Sinclair’s application to set aside the bankruptcy notices. The case was advanced by Mr Dallas on Mr Sinclair’s behalf on the basis that Mr Emmott had assigned a proportion of any successful outcome in the arbitral proceedings to Mr Sinclair in consideration of Mr Sinclair having funded the defence. He contended that documentation in the affidavit evidence reflected such an arrangement. In my judgment I concluded that it did nothing of the sort. For a start, such documentation as there was tended to suggest that the arrangement was more in the nature of a loan on conventional commercial terms involving the repayment of principal and the payment of interest. Furthermore, I concluded that the documentation did not establish any concluded arrangements at all. It consisted of a draft which was incomplete and unexecuted, and of virtually no probative value. Finally, even if there had been any force in the argument, Mr Sinclair would still face a difficulty in that the evidence demonstrated that the English High Court had issued what is there called a third party debt order (still referred to as a garnishee order in this jurisdiction) which, amongst other things, prohibited Mr Emmott from paying any amount that might be payable to Mr Sinclair pursuant to the type of arrangement I have described.
[20] In this application, Mr Sinclair’s position has changed radically. On his behalf, Mr Dallas appeared to accept that there was no assignment of rights as between Mr Emmott and Mr Sinclair to any particular proportion of the proceeds of an arbitral award in Mr Emmott’s favour, but rather that the arrangement was in the nature of a loan. The affidavit evidence before the Court on this application included what appeared to be a final and executed version of the loan documentation and a recent agreement (executed a matter of days before the hearing before me) which purported to crystallise the amount Mr Emmott was agreeing to pay Mr Sinclair.
[21] Against that background, I see a number of problems for Mr Sinclair in advancing his appeal.
[22] First, Mr Sinclair will have to persuade the Court of Appeal to receive further evidence and that he should be permitted to advance his appeal on materially different grounds from those on which he relied in this Court.
[23] Second, even assuming that the Court of Appeal is prepared to entertain the appeal in those circumstances, some of the difficulties that I identified in my judgment remain:
(a)The agreement between Mr Emmott and Mr Sinclair proceeds on the basis that nothing is payable by the former to the latter except out of the proceeds of a successful arbitral award, and if one thing is clear it is that Michael Wilson & Partners has not yet paid any proportion of the award in favour of Mr Emmott. Accordingly, the very recent agreement between Mr Emmott and Mr Sinclair appears to have been reached despite, rather than pursuant to, the earlier arrangements.
(b)The 25 August 2020 agreement is said to be conditional upon Michael Wilson & Partners agreeing to a set-off and there is no evidence of any such agreement.
(c)From his Honour Judge Pelling QC’s recent judgment,6 it is apparent that the third party debt order remains in force which means that Mr Emmott is not in a position to pay anything to Mr Sinclair.
[24] On those bases, I have my reservations as to whether Mr Sinclair is likely to be successful in his appeal. Accordingly, this factor appears to me to count against making the order sought.
6 At n 2 above.
The progress of the appeal
[25] In the course of argument there was some difference between counsel as to whether an appeal had even been commenced. There is no doubt that on Mr Sinclair’s behalf his solicitors had filed a notice of appeal. But, as at the date of the hearing, a copy of the same had not been served on Michael Wilson & Partners and as I understand it security had not been fixed or paid. As Mr Sullivan submitted that meant that at least at that stage the appeal had not been commenced.
[26] However, I accepted Mr Dallas’ assurance that if there were any technical difficulties relating to the commencement of the appeal those would be rectified immediately, and I am prepared to assume that the appeal was — in the full sense — commenced shortly after the hearing before me.
[27]Nevertheless, it is fair to say that the appeal is in its infancy.
[28] Neither Mr Dallas nor Mr Sullivan were able to assist in terms of when an appeal may be heard. My own view is that, in the absence of a successful application for urgency, it is most unlikely that it would be heard until after the first quarter of next year at the earliest.
[29] Inevitably, then, if an order of the type sought were to be made, Michael Wilson & Partners would be frustrated in terms of its entitlement to enjoy the fruits of the four judgments (such as they are). However, against the background of the litigation that I have described, this delay is a minor consideration.
[30] I do not regard the prospect of a delay of three to six months as a significant factor in the context of this litigation.
The consequences for the parties of making or refusing the order
[31] A refusal of the order sought would certainly have serious consequences for Mr Sinclair. It would expose him to the risk of bankruptcy. On the other hand, for Michael Wilson & Partners, the consequence of a refusal of the order sought would simply mean a further period of delay in connection with the finalisation of litigation in which that company itself appears to have been responsible for significant periods
of delay. If the Court were to make the order sought, then there would be no adverse consequences for Mr Sinclair and he would have further time within which to extract himself from this global imbroglio. For Michael Wilson & Partners the consequences of an order would be involvement in further litigation in this country and an inevitable period of delay in litigation which seems to be interminable but which, at least if the English courts have correctly described the situation, as I am sure that they have, the company itself has been responsible for long periods of delay.
[32] This is very much a balancing exercise. My judgement is that the relative consequences for the parties of making or refusing the order sought fall in favour of the making of the order.
Any known consequences for third parties
[33] Neither counsel advanced an argument which relied on the flow-on consequences for third parties as a basis for making or refusing the order.
[34]I therefore discount this factor.
Any other factors
[35] I am conscious of an observation made by the Court of Appeal in its judgment of August 2016 in which it overturned this Court’s judgment and registered the four judgments which are the subject of this proceeding, to the effect that this litigation must be brought to a conclusion (at least in this jurisdiction) and that the Court would not truck further delay.7
[36] I regard this as a factor that I am obliged to take into account and which must be brought to account in the mix against the granting of the order sought.
My overall assessment
[37] It appears to me that the most important considerations are first the principle that Michael Wilson & Partners should not be prevented from pursuing enforcement proceedings in relation to these four long outstanding judgment debts (originally based
7 Michael Wilson & Partners Ltd v Sinclair [2016] NZCA 376 at [37].
on costs awards made in the firm’s favour as I understand it) except for very good reason, the history of the Michael Wilson & Partners litigation in which that firm has come in for the severest possible criticism for, amongst other things, delay, and that what is sought by Mr Sinclair in this application is the opportunity to test my judgment of 24 July 2020 before being exposed to the risk of bankruptcy.
[38] Standing back from the matter as best I can, and notwithstanding my assessment that the prospects of a successful appeal on this case are remote, by a relatively fine margin, the view I take is that the balance falls in favour of making the order sought.
Orders
[39] For those reasons, I make an order pursuant to s 38 of the Insolvency Act 2007 halting Michael Wilson & Partners’ four applications in these proceedings until such time as Mr Sinclair’s appeal is disposed of in the Court of Appeal. That order is conditional upon Mr Sinclair taking all available steps to prosecute his appeal with expedition (including if appropriate seeking urgency for the same), and I grant leave to Michael Wilson & Partners to come back to this Court to review the position in the event of Mr Sinclair not complying with that condition.
[40] As to costs, my preliminary view is that the judgment debtor is entitled to a costs order in respect of this application on a 2B basis. However, not having heard from counsel in relation to this, I reserve costs. I expect that counsel will be able to resolve them without further reference back to the Court. However, if that proves impossible, counsel may file memoranda in the usual way and I will deal with costs on the papers.
Associate Judge Johnston
Solicitors:
Langford Law, Wellington for judgment creditor J D Dallas Law, Wellington for judgment debtor
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