New Zealand Bloodstock Finance & Leasing Limited v Jones
[2023] NZHC 1131
•11 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1770
[2023] NZHC 1131
IN THE MATTER of an application to set aside Bankruptcy Notice BETWEEN
NEW ZEALAND BLOODSTOCK FINANCE & LEASING LIMITED
Judgment Creditor
AND
GREGORY JOHN JONES
Judgment Debtor
Hearing: 20 April 2023 Appearances:
G J Jones (self-represented)
F A King for Judgment Creditor
Judgment:
11 May 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
This Judgment was delivered by me on 11 May 2023 at 3:30pm Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ……
NEW ZEALAND BLOODSTOCK FINANCE & LEASING LIMITED v JONES [2023] NZHC 1131 [11 May 2023]
[1] On 5 June 2020, New Zealand Bloodstock Finance & Leasing Limited (Bloodstock) obtained a judgment against Mr Jones.1
[2] Mr Jones unsuccessfully appealed the entering of summary judgment to the Court of Appeal which released its decision on 25 August 2022.2
[3] Mr Jones has applied for leave to appeal to the Supreme Court; his leave application has not yet been determined.
[4] Bloodstock served Mr Jones with a bankruptcy notice which Mr Jones applies to set aside and in the alternative, that any application for adjudication should be halted until Mr Jones’ application for leave and any resulting appeal can be heard.3
[5] On 23 June 2022, this Court fixed costs in respect of the summary judgment proceeding4 and Mr Jones appealed that decision to the Court of Appeal on 21 July 2022. The bankruptcy notice in this proceeding relies on the amount due under both the substantive summary judgment and the subsequent costs decision.
[6] The application to set aside the bankruptcy notice is made on the following grounds:
(i)the bankruptcy notice is defective as it states an incorrect sum in respect of the judgment; and
(ii)Mr Jones has a cross-claim against Bloodstock that:
(a)is equal to or greater than the judgment debt; and
(b)Mr Jones could not use his cross-claim as a defence in the action or proceeding in which the judgment was obtained.
1 New Zealand Bloodstock Finance & Leasing Ltd v Jones [2020] NZHC 1233, (2020) PRNZ 347.
2 Jones v NZ Bloodstock Financing & Leasing Ltd [2022] NZCA 397. (Bloodstock is named as “Bloodstock Financing” rather than “Bloodstock Finance” in this decision, and is assumed to be a typographical error)
3 Insolvency Act 2006, ss 38 and 42.
4 New Zealand Bloodstock Finance & Leasing Ltd v Jones [2022] NZHC 1477.
Recusal
[7] Mr Jones, in his submissions dated 6 April 2023 seen by me on 18 April 2023, raised the issue of whether I should recuse myself from hearing his application.
[8] I issued a brief minute on 18 April 2023 in which I said I was not aware of any issue that would warrant me recusing myself. In that minute, I said if Mr Jones considered grounds for recusal existed, he could raise them at the hearing. Later that day in an email to the Court, Mr Jones said the grounds were set out in his submissions. I can see no such grounds in his submissions. However, Mr Jones requested that I answer questions that he set out in his submissions.
[9] Mr Jones then referred to a timetable minute I issued on 2 March 2023 in relation to Mr Jones’ application for leave to call oral evidence in this hearing. I will expand on that application in the next section of this judgment.
[10]Mr Jones described my timetable minute of 2 March 2023 as:
… yet another example of inconsiderate and inappropriate judicial conduct having regard to the commitment I had to appear in a civil trial in the Wellington High Court that was still being heard (to the knowledge of Associate Judge Lester) when I was required to prepare the submissions in accordance [with] the Associate Judge’s first Minute.
[11] Timetables are not set to embarrass parties. What Mr Jones fails to refer to in his submissions is that having received Mr Jones’ advice that he was tied up in a hearing, by minute dated 10 March 2023, I said:
Taking into account Mr Jones’ trial commitments, time for Mr Jones to file and serve his submissions is extended to 5:00pm on Wednesday 15 March 2023.
[12] Mr Jones did not take up the opportunity to file submissions as allowed by the revised timetable. That led me, on 21 March 2023, to dismiss Mr Jones’ application to call oral evidence.5
5 Jones v New Zealand Bloodstock Finance and Leasing Ltd [2023] NZHC 572.
[13] As I will touch on below, Mr Jones is concerned about the impartiality of some of the Judges who have dealt with his matters. Because of that concern, Mr Jones requested I answer questions aimed at ascertaining whether I have any personal knowledge of the matters in issue between him and Bloodstock and whether I have discussed Mr Jones’ proceedings with members of the Judiciary about whom Mr Jones has concerns.
[14] At the hearing, Mr Jones submitted his questions should be answered in writing before the issue of recusal was addressed. Mr Jones said his concerns were not with me in particular, and that he would raise the questions with whoever had been allocated to hear his application. Mr Jones said he had raised the same questions with the Supreme Court in respect of his application for leave to appeal the decision of the Court of Appeal.
[15] At the end of Mr Jones’s submission on this point I made the following ruling in Court which I said would be included in this Judgment.
[16] I did not consider that I was bound to answer the questions raised by Mr Jones. I was not going to give a ruling opening up the ability of parties to question Judges and I commented that as experienced counsel, I expected Mr Jones would understand why that would be the case. I noted that as Mr Jones had also put his questions to the Supreme Court, if that Court wished to provide some guidance on the issue of whether Judges could be questioned on a recusal issue, then that Court would do so.
[17] I advised Mr Jones that having regard to the questions he had raised, I was not aware of any issue meaning I should recuse myself. I also commented that I was not an Auckland based Judge and that I knew nothing about the case other than that which I had read in the papers.
[18]Accordingly, I declined Mr Jones’ application that I recuse myself.
The application to call oral evidence
[19] In Mr Jones’ written submissions, over some six pages, he presented a critique of my decision declining his application to call oral evidence. In his oral submissions,
Mr Jones developed an argument that the Court should take a broader view of the need for oral evidence – I will address that issue below.
Principles applying to the setting aside of a bankruptcy notice
[20] The principles to be applied are well established. Section 17 of the Insolvency Act 2006 (the Act) relevantly provides as follows:
17 Failure to comply with bankruptcy notice
(1)A debtor commits an act of bankruptcy if—
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b)execution of the judgment or order has not been halted by a court; and
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the time limit specified in subsection (4),—
complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
…
(7)In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that—
(a)is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and
(b)the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.
[21] In summary, ss 17(1)(d) and 17(7), require the debtor to demonstrate the existence of a cross-claim of true substance that he or she genuinely proposes to pursue.6
6 Sharma v ANZ Banking Group (1992) 6 PRNZ 386 (CA) at 389.
[22]In Westpac New Zealand Ltd v Chen citing Clark v UDC Finance Ltd:7
This must be equal to, or greater than, the judgment debt. The applicant must also establish that the cross-claim could not have been established as a defence in the proceeding in which the judgment underpinning the bankruptcy notice was entered.
What did Mr Jones argue in opposition to the application for summary judgment?
[23] I do not intend to summarise in detail the decision of Justice Jagose, granting summary judgment against Mr Jones. The debt that Bloodstock sought judgment for arose under credit contracts under which it advanced money to allow Mr Jones to purchase interests in thoroughbred horses between May 2016 and October 2017. The Court of Appeal have observed there appears to be no real doubt about Mr Jones’ obligation to pay the debts under those agreements.8
[24] The Court of Appeal have noted that Mr Jones’ principal defence is that he has an equitable set-off which exceeds the judgment debt.9
[25]Jagose J summarised Mr Jones’ defence as:10
… an alleged wide-ranging conspiracy in at least the thoroughbred industry to harm his Bloodstock business (but extending to allegations against his former wife, the firm in which he formerly was partner, and an insurance company) of which [Bloodstock’s] actions in enforcement of his liabilities to it are said to be a part.
[26] Mr Jones is express that he is making an allegation of fraud by Bloodstock and others.
[27] The following paragraph is the Court of Appeal’s summary of Mr Jones’ defence to Bloodstock’s claim:11
[35] It appears that Mr Jones maintains Bloodstock understood it would need to support him for a period of years while his business became profitable, but the Judge remarked that there is no reference to this in the documents,
7 Westpac New Zealand Ltd v Chen [2022] NZHC 1834 at [9]; Clarke v UDC Finance Ltd [1985] 2 NZLR 636 (CA) at 639.
8 Jones v New Zealand Bloodstock Financing and Leasing Ltd [2021] NZCA 213 at [33].
9 At [34].
10 New Zealand Bloodstock Finance & Leasing Ltd v Jones, above n 1, at [14].
11 Jones v New Zealand Bloodstock Financing and Leasing Ltd, above n 8, at [35].
which provide rather for earlier repayments. Mr Jones alleges that Bloodstock and others instead conspired to shut his business down. To this end the conspirators engaged in conduct which amounted to encouraging him to pay too much for horses or impeding their sale. On Mr Jones’s evidence this conspiracy is remarkable for both the number of participant and the actions that they took. It is said for example that some horses were made ill or injured or falsely said to have medical conditions, while others were misrepresented at auction or their sales mismanaged. There are many other claims; it is not unfair to say that he appears to attribute all his business disappointments to the malign actions of others. It is said that the conspirators turned against him partly because he had acted in proceedings brought by a vendor who was said to have been defrauded by those who sold her horse.
[28] In entering judgment against Mr Jones, Jagose J took the view that even if the matters raised by Mr Jones had merit, then they would not amount to a set-off but would be a counterclaim.
Court of Appeal’s rulings on Mr Jones’ opposition to summary judgment
[29] The Court of Appeal judgment contains a review of the affidavits filed by Mr Jones and details of the allegations that he makes in support of the wide ranging conspiracy he asserts.
[30] The Court of Appeal disagreed with Jagose J’s conclusion that Mr Jones’ claims could not in any event qualify as an equitable set- off.12 On that basis, the Court of Appeal went on to consider the evidence relied on by Mr Jones in support of his defence.
[31] The conclusion of the Court after reviewing the events that Mr Jones say are only explicable through there being a conspiracy to harm his interests was as follows:13
[115] In any event, we are satisfied that the allegations made in Mr Jones’ original affidavit and the additional points made in his subsequent affidavits regarding the conduct of NZB Finance, or those allied to it, inarguably fall short of the foundation that would be required to recognise the prospect of such a claim.
12 Jones v New Zealand Bloodstock Financing & Leasing Ltd, above n 2, at [64].
13 At [115].
The counterclaim relied on in this application
[32] It is clear from the material filed by Mr Jones that he wishes to rely on the same conspiracy allegation in this application that was not accepted by the Court of Appeal.
[33]Mr Jones’ submitted:
[53] In the first instance I was prevented from raising a set-off as a result of the decision of Jagose J. His Honour decided that an equitable set-off could not be utilised and as a result, on the basis of that, I was unable to legally proceed with that set-off. The Court of Appeal has altered that decision but the matter is still the subject of an appeal [to the Supreme Court].
[34] As I will refer to below, Mr Jones notes that a number of other parties would need to be joined to any proceeding: “… in order for the concerted activity (conspiracy) to be properly put before the Court”.
[35] The damages claim that Mr Jones outlines in his submissions relate to losses allegedly arising from the conduct which he says evidences the conspiracy against him.
[36] I am satisfied that Mr Jones seeks in this application to rely on the same alleged conspiracy defence that he raised before Jagose J and the Court of Appeal.
[37] In Minter Ellison Rudd Watts v Hampton, Associate Judge Osborne (as he then was), considered that the Courts approach in determining whether a defendant had a defence to an application to summary judgment was essentially the same as when determining whether that defendant had grounds to apply to set aside a bankruptcy notice based on the prior summary judgment decision.14 Associate Judge Osborne discussed the principles of the doctrines of res judicata and issue estoppel and held that issue estoppel arose in that case. His Honour considered that the approach the Court takes to testing the plausibility of a suggested defence or cross-claim is consistent in both the summary judgment jurisdiction and the bankruptcy jurisdiction. In the summary judgment ruling in issue in Hampton, Associate Judge Christiansen
14 Minter Ellison Rudd Watts v Hampton [2012] NZHC 1715 at [46] – [47].
held that the debtor’s claim against Minter Ellison Rudd Watts was not a claim of true substance, therefore the debtor had no arguable defence to the claim.15
[38]Associate Judge Osborne found at [45] that:
… it is reasonable in the circumstances to regard the earlier decisions as a final determination of the issue which Mr Hampton wishes to raise once again – whether Mr Hampton had an arguable claim. That issue was determined, against Mr Hampton. If he now wishes to pursue a stand-alone claim independently of this proceeding by issuing a claim (rather than by seeking to defeat his creditor’s enforcement in a summary context), he has that entitlement – what would be unreasonable is if the Court were to allow him to revisit the arguability issue in the context of the creditor’s enforcement of the judgment which was obtained through Minter Ellison satisfying the Court that Mr Hampton’s cross-claim was not arguable.
[39] As Mr Jones seeks to rely on the same alleged conspiracy rejected as a defence in the summary judgment context, Hampton is authority for the proposition he cannot raise the same allegations to found an application to set aside the bankruptcy notice.
Is there an ability for the bankruptcy Court to go behind the Court of Appeal’s rejection of Mr Jones’ defence?
[40] Mr Jones referred to the ability the Court has in the bankruptcy jurisdiction to go behind judgments upon which a bankruptcy notice is based. In its simplest terms, Mr Jones submitted this Court in its bankruptcy jurisdiction was not bound by the Court of Appeal judgment or the judgment of Jagose J and that this Court is entitled to reach its own view in relation to his defence.
[41] Associate Judge Bell, in his decision Fava v Official Assignee, considered the circumstances when a Court of Bankruptcy can enquire into the underlying judgment debt.16 His Honour summarised the position as follows:17
[20] … The leading authority is the decision of the High Court of Australia in Corney v Brien.18 Four of the judges of the High Court cited old authority that it is a settled rule that a court of bankruptcy can enquire into the consideration for a judgment debt. A judgment may be investigated, particularly when judgment has gone by default. They cited an earlier
15 Minter Ellison Rudd Watts v Chesterfields Preschools Ltd & Ors HC Christchurch CIV-2009-409-001700, 11 February 2010.
16 Fava v Official Assignee [2012] NZHC 2980.
17 At [20]-[21].
18 Corney v Brien (1951) 84 CLR 343 at 358.
decision of the High Court of Australia in Petrie v Redmond where Latham CJ said:19
The court (ie the Court of Bankruptcy) is entitled to go behind the judgment and enquire into the validity of the debt where there has been fraud, collusion or miscarriage of justice… Also the court looks with suspicion on consent judgments and default judgments.
[21] Fullager J gave a separate decision. He examined the law more closely. In particular, he considered the situation where there has been a trial on the merits, as opposed to a default judgment. He cited In Re Flatau ex parte Scotch Whisky Distillers Ltd where Fry LJ said, in relation to the power to look behind a judgment in bankruptcy:20
This power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issues have been tried out before a court.
Fullagar J said:21
No precise rules exist as to what circumstances call for an exercise of the power, but certain things are, I think, clear enough. If the judgment in question followed a full investigation at a trial in which both parties appeared, the court will not re-open the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out.
The authorities, of which Petrie v Redmond:22
… is an example, are generally concerned not with a substantive fraud allegation on which a particular civil proceeding may be based. Rather, they focus on the way in which a particular judgment (especially where it is a consent or a default judgment) has been obtained (for instance, through the fraud or collusion in the way the substantive judgment was obtained by the parties or counsel involved through a miscarriage of justice).
[42] The fraud relied on by Mr Jones is not in relation to how Bloodstock obtained its judgment, but as the basis of his counterclaim.
[43] What Mr Jones is asking this Court, sitting in its bankruptcy jurisdiction, to do amounts to a collateral attack on the decision of the Court of Appeal.
[44] I decline to review the merits of the decision upon which the bankruptcy notice is based. In effect, Mr Jones is asking this Court to carry out the same exercise he has
19 Petrie v Redmond (1942) 13 ABC 48 at 49; (1943) QSR 75 at 76.
20 In re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83 at 86.
21 At 357.
22 Harrison v Harrison [2015] NZHC 254 at [31].
asked the Supreme Court to carry out in his leave application, that is, to review the merits of the findings of the Court of Appeal.
[45] Where a bankruptcy notice is based on a judgment which was the subject of full argument at first instance and has been the subject of an appeal, an application to set aside the bankruptcy notice based on those decisions is not conducted as if it were a further quasi appeal. Accordingly, the situation is this:
(a)the set-off/counterclaim that Mr Jones relies on to set aside the bankruptcy notice (being the same claim raised by him before Jagose J and the Court of Appeal) was rejected by the Court of Appeal;
(b)the counterclaim rejected by the Court of Appeal cannot be relied on by Mr Jones to set aside the bankruptcy notice;
(c)Hampton confirms Mr Jones is free to pursue a standalone claim independently of this proceeding;23
(d)it follows that Mr Jones has not established the grounds under ss 17(1)(d) and 17(7) of the Act which would warrant the setting aside of the bankruptcy notice.
Mr Jones advocates for an entirely new approach
[46] Mr Jones submitted that the Court should adopt a process reflecting his submission that an application to set aside a bankruptcy notice was not an interlocutory application. Mr Jones submitted this application, given what he said were its special circumstances, should be seen as akin to an originating application or at least should be approached in the same way. Mr Jones submitted the Court could treat his application as involving a hybrid process and view it as closer to a proceeding than an interlocutory.
23 In late 2021, Mr Jones did commence a substantive proceeding against 16 defendants relating to his alleged conspiracy. Jones v NZ Bloodstock Finance & Leasing Ltd [2021] NZHC 3220. That proceeding was struck out by Venning J, on the basis that the proceeding was an abuse of process.
[47] The reason for that submission was what amounted to a request that I revisit or at least depart from my earlier ruling in relation to Mr Jones’ application to call oral evidence. In part, in support of the submission that this Court should look behind the judgments of Jagose J and the Court of Appeal, Mr Jones submitted this Court should go further than previous Courts and consider when and in what respect further evidence should be permitted.
[48] Mr Jones took me through five aspects of his fraudulent conspiracy claim. He submitted that in the context of a bankruptcy application, the Court should consider whether further evidence may have resulted in a different outcome in the earlier decisions. Mr Jones submitted the earlier decisions did not get to grips with the detail of his case, warranting a re-assessment of his claims with further evidence.
[49]The five issues were as follows.
First issue
[50] The first issue was the accuracy of Mr Rolston’s valuation and whether its disparity from a later valuation obtained by Mr Jones was of such a magnitude that the disparity of itself meant there was a tenable case of fraud. This issue is discussed in the Court of Appeal judgment at [30] and [73]-[87].
Second issue
[51] The second issue was the injury to a colt owned by Mr Jones referred to in the Court of Appeal judgment as the “Reliable Man – Adalia colt”. Mr Jones considered the colt had a substantial value but it suffered a swollen hock. Mr Jones asserts that the veterinary care of the colt was so substandard as to only be explicable through deliberate mistreatment or withholding of treatment to the colt to harm his interests. Mr Jones submitted he was struggling to obtain expert evidence in respect of this claim and a Court appointed expert was called for. This claim is also discussed in the Court of Appeal judgment at [31] and [32].
Third issue
[52] The third issue was the treatment of a foal born to a mare owned by Mr Jones. The foal was born with a condition relating to an imbalance in its red blood cells. Mr Jones obtained expert evidence to the effect that how the vets concerned treated the foal was not consistent with their diagnosis. Mr Jones submitted this meant the diagnosis was intentionally false as the vets did not treat the foal for the condition the vets told him the foal was suffering from. Mr Jones describes the vets’ delay in arranging the foal’s referral to an emergency clinic as being “inexplicable”.
[53] Mr Jones submits further expert evidence is required. This issue was discussed by the Court of Appeal at [40] and [108]-[109].
[54] Mr Jones submitted the circumstances of the second and third issues described above, were so extreme in terms of what could be considered appropriate conduct, they are consistent with his claim of a conspiracy.
Fourth issue
[55] The fourth issue involved the sale of a thoroughbred filly sent for sale in Australia. Mr Jones submitted the filly was confirmed by a vet at the farm in New Zealand as being fine to go to Australia. Mr Jones said he was careful to ensure the health of the filly, given there was a $7,000 cost just in air freight to Australia. Mr Jones submitted he was on the telephone to his agent in Australia while the filly went through the auction ring where it sold for $30,000. While Mr Jones submitted that the price was less than he expected, nonetheless he understood the filly had been sold. However, two days later, Mr Jones was presented with video evidence that the filly was unable to walk and the sale fell through.
[56]Mr Jones considered there were only three possibilities:
(a)firstly, that the information given to him in New Zealand that the filly was healthy, was wrong and he had been lied to;
(b)secondly, that the filly never went through the sale ring at all given its condition and what he heard over the telephone was a fictitious sale; or
(c)thirdly, that the video sent to him of the filly showing it was unable to walk was not of his horse at all.
[57] Mr Jones considered the situation to be otherwise inexplicable and one that needs to be looked at closely. He submitted the only explanation for what happened was that he was being lied to in New Zealand or in Australia and what happened cannot be dismissed and that he was not imagining things. This claim was one Mr Jones submitted needed to be explored and required evidence from the vets in New Zealand, those at the farm in New Zealand where the filly was being kept, and those involved in the sale in Australia. This issue is discussed in the Court of Appeal judgment at [48].
[58] Mr Jones did not seem to contemplate that the filly may have sustained an injury in being air freighted to Australia that only manifested itself sometime after the sale, that is, its injury was an accident.
Fifth issue
[59] The day prior to the hearing of this application, Mr Jones filed a further affidavit. He referred to an arrangement he had with a farmer in Waikato where Mr Jones had a mare being looked after on the basis Mr Jones and the farmer would share the proceeds of the sale of its foal. The whole transaction was handled by the farmer with the foal being sold at a sale for $50,000. Apparently, some time later, the foal was sent to Hong Kong having been sold for a substantially higher amount. Mr Jones’ research shows that the foal apparently remained registered with the New Zealand Racing Conference in the name of the Waikato farmer. Mr Jones saw this as another aspect of the conspiracy. This matter was not raised with the High Court or the Court of Appeal, however, Mr King, counsel for Bloodstock, submitted it was not a new matter.
[60] As recorded in the Court of Appeal judgment, Mr Jones applied for leave to file fresh evidence. That application was made in April 2022 and was granted in part.
Mr Jones learnt of the foal being sent to Hong Kong while apparently still registered in the name of the Waikato farmer, on 4 January 2022. Accordingly, it was a matter he could have raised in his application to produce further evidence made to the Court of Appeal.
[61] In respect of the application to produce further evidence in the Court of Appeal, Mr Jones referred to the Court of Appeal’s exclusion of evidence relating to the conduct of members of the judiciary and events concerning Mr Jones’ family. Mr Jones submitted the absence of that evidence meant a number of crucial pieces of the jigsaw were missing, submitting without those pieces it was not possible to determine whether there was a conspiracy against him.
Mr Jones’ difficulties in obtaining evidence to support his claims
[62] Mr Jones submitted the very nature of the allegations he was making meant use of the reluctant deponent provision was unsatisfactory. There was no prospect of the people involved in the alleged conspiracy co-operating and giving affidavits and in any event if they did, any material they would provide would not be helpful to Mr Jones. Equally, there were issues with subpoenaing the witnesses as they may not give helpful evidence without being cross-examined by Mr Jones.
[63] Mr Jones submitted if the present application was not treated as an interlocutory application, that would open up a more flexible approach to the issuing of witness subpoenas. Mr Jones submitted the five issues he has raised, as described above, can only be fully investigated if he has a chance to cross-examine the people involved.
[64] In my view, such an approach would turn an application to set aside a bankruptcy notice into what, in effect, would be a trial of Mr Jones’ conspiracy allegations.
[65] The short point is that I have already declined Mr Jones’ application to call oral evidence and in doing so, treated the present application as interlocutory in nature. The hearing of the application to set aside the bankruptcy notice was not the time or place to mount a challenge to my judgment declining the application to call oral
evidence to which no challenge was raised by Mr Jones prior to him filing submissions.
[66] Mr Jones’ oral submissions also addressed briefly each of the grounds of appeal that he wishes to raise with the Supreme Court. Again, it is not for me to comment on the merits one way or the other in respect of those grounds.
[67] While I can understand the evidentiary difficulties described by Mr Jones, the inescapable point is that his submission that further evidence might support his claims in respect of the issues canvassed above, does not answer the fact that the merits of his counterclaim were ruled upon by the Court of Appeal in a decision binding on me. Mr Jones’ submission that this application should be approached as more akin to a proceeding than an interlocutory application, thereby potentially opening up the ability to subpoena relevant witnesses, simply reinforces that in this application he is seeking to challenge the decision of the Court of Appeal. The submissions Mr Jones developed on this point does not take his application any further.
Costs decision of Jagose J
[68] The fixing of costs in relation to the summary judgment hearing has had a tangled history.24
[69] Jagose J fixed costs on 23 June 2022.25 Mr Jones filed submissions in relation to that process. In short, Mr Jones’ submissions were not accepted and Bloodstock were awarded indemnity costs pursuant to its contracts, save for one minor respect in relation to a disbursement that had been double counted.
[70] Mr Jones appealed the costs decision but that appeal was deemed abandoned. Mr Jones applied for an extension of time to file his case on appeal. The result of that application is not known at the time of finalising this judgment.
24 Jones v New Zealand Bloodstock Finance & Leasing Ltd [2021] NZHC 1228.
25 New Zealand Bloodstock Finance & Leasing Ltd v Jones [2022] NZHC 1477.
[71] If Mr Jones’ application for leave to appeal the summary judgment decision to the Supreme Court is granted, and if that appeal is successful, then the costs judgment in the High Court will almost inevitably fall away.
[72] If the application for an extension of time to appeal the costs decision is declined by the Court of Appeal, then Jagose J’s costs judgment will be a final judgment, save for the prospect of the summary judgment decision being overturned by the Supreme Court. If leave is granted then the merits of the costs decision will be for the Court of Appeal.
[73] Mr Jones submits the costs judgment is invalid as it was based on a memorandum rather evidence and because he considers Jagose J was functus, meaning that the bankruptcy notice states an incorrect amount.
[74] The short point is that until Jagose J’s judgment is set aside there is a sealed order of the Court in relation to costs.
[75] Accordingly, I do not accept Mr Jones’ submission that the bankruptcy notice claims an incorrect amount as it reflects sealed orders of this Court.
Inherent jurisdiction
[76] Mr Jones submitted the Court has an inherent jurisdiction to set aside a bankruptcy notice.26
[77] Mr Jones relied on the following passage from The Law of Insolvency in New Zealand:27
The court may set aside a bankruptcy notice on grounds other than those specified in the notice itself if a debtor establishes that it is an abuse of the court’s process for the creditor to bankrupt them … categories of cases where debtors have succeeded under this head include:
“Where the issue of the notice constitutes oppressive or extortionate conduct on the part of the creditor”.28
26 Re Wise HC Auckland B227/95, 21 June 1995.
27 Lynne Taylor and Grant Slevin The Law of Insolvency in New Zealand (Thomson Reuters, Wellington, 2021) at [9.4.4].
28 See Stansfield v Gould, HC Auckland B1378/01.
[78] Mr Jones submitted the bankruptcy notice in the proceedings against him is an extension of the oppressive and extortionate conduct of Bloodstock.
[79] The reference to “extortionate conduct” is a variation of Mr Jones’ conspiracy allegation against Bloodstock.
[80] As the Court of Appeal noted, there appears no real doubt as to Mr Jones’ obligation to pay the judgment debt. All Bloodstock is doing in this application, is taking steps it is entitled to in respect of an order of this Court. Mr Jones’ arguments considered to be without substance by the Court of Appeal do not gain new life through being advanced in support of a request that the Court set aside the bankruptcy notice pursuant to its inherent jurisdiction.
Application to stay bankruptcy proceedings
[81] Mr Jones’ application also sought a stay of the bankruptcy proceedings. Mr Jones’ application, when setting out the grounds upon which the order was sought, asserted that any application for adjudication should be halted until the applicant’s appeal in relation to the judgment is heard.
[82]This aspect of Mr Jones’ application relied on ss 38 and 42 of the Act.
[83] Sections 38 and 42 of the Act appear under the heading “Court’s options when hearing creditor’s applications”. Section 38 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.
[84]Section 42 of the Act provides:
42 Halt or refusal of application when judgment under appeal
(1)This section applies if the creditor’s application for adjudication relies on one of the following acts of bankruptcy:
(a)the debtor failed to comply with a bankruptcy notice (see section 17):
(b)a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28).
(2)If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the court may—
(a)halt the creditor’s application for adjudication; or
(b)refuse the application.
[85] Mr King, counsel for Bloodstock, submitted the short answer to this aspect of the application was, the jurisdiction to stay created by the above provisions was not available as Bloodstock has not yet filed an application. While not putting it in these terms, Mr King’s submission amounts to saying Mr Jones’ application has “jumped the gun” when seeking to halt the adjudication process.
[86] Mr Jones’ written submissions addressed why he was entitled to apply to halt an application for an adjudication not yet made. He said:
In this regard I submit the word “halt” has been chosen specifically as opposed to the use of the [word] ”stay”.
[87] Mr Jones submitted that if his submission in that regard was not accepted, that would mean his application for a halt of the proceedings could not proceed further.
[88] Commercial Law in New Zealand, notes the change of language from the 1967 Act which referred to the Court having the ability to stay or dismiss a petition on the ground that an appeal was pending to halting the application.29 The authors note:
The change in language appears to be simply an attempt to moderni[s]e the term, rather than to alter the principles to be applied.
29 Matthew Barber (ed) Commercial Law in New Zealand (online ed, Lexis Nexis) at [39.2.1].
[89] The authors refer to the decision of Associate Judge Osborne (as he then was) in Chesterfields Preschools Ltd (in liq) v Sisson,30 where the Judge adopted the observation to the same effect in Brookers Insolvency Law and Practice.31
[90] I do not accept Mr Jones’ submission that either ss 38 or 42 permit the Court to, in a practical sense, injunct a creditor from filing an application for adjudication.
[91] One cannot halt something that has not commenced. The wording of s 38(1) refers to the Court halting the application rather than restraining or preventing a creditor commencing an application. Section 42(1) applies if the creditor’s application relies on one of the specified acts of bankruptcy meaning, a creditor’s application for adjudication must be before the Court for s 42 to apply, that is, for the Court to know if the application relies on one of the specified acts of bankruptcy.
[92] These conclusions are consistent with the heading of the Act under which these sections appear (noted above) and of course with the text and authorities already referred to.32
[93] It follows that as I do not consider there is jurisdiction to halt an adjudication process that has not yet commenced, Mr Jones’ application for orders preventing Bloodstock from issuing an adjudication proceeding is declined.33
Costs
[94] Given I have dismissed Mr Jones’ application, there is no reason why costs should not follow the event.
30 Chesterfields Preschools Ltd (in liq) v Sisson [2017] NZHC 1410.
31 Stephen Revill and Robyn Merrett Brookers Insolvency Law and Practice (looseleaf ed, Thomson Reuters) at IN38.2.
32 Section 10(3) and (4) of the Legislation Act 2019.
33 During the hearing I indicated I intended to enquire of the Registrar of the Supreme Court as to the progress of Mr Jones’ application for leave to appeal. However, given my finding as to jurisdiction, I will not be taking that step. I note the undertaking given to the Court by counsel for Bloodstock to the effect that if leave to appeal to the Supreme Court is granted, pending the determination of that appeal, Bloodstock, while it will file an application for adjudication, would not seek adjudication.
[95] If counsel for Bloodstock considers Bloodstock’s contractual entitlement to indemnity costs extends to this application then they are to file a costs memoranda with the usual supporting material within five working days of the date of this Judgment. If no such memorandum is filed then the order of the Court shall be that Bloodstock is entitled to costs on a 2B basis plus disbursements as fixed by the Registrar.
[96]If a costs memorandum is filed, Mr Jones is to reply within five working days
and I will deal with costs on the papers.
Associate Judge Lester
Solicitors:
McKenna King Dempster, Hamilton (Defendant/Respondent)
Copy to:
Mr G J Jones, (Plaintiff/Applicant in person)
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