Prain v Smith - [2021] NZHC 1949

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2355

[2021] NZHC 1949

UNDER the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of GREGORY ROBERT SMITH

BETWEEN

JUSTIN WILLIAM PRAIN

Judgment Creditor

AND

GREGORY ROBERT SMITH

Judgment Debtor

Hearing: 14 June 2021

Appearances:

J Moss for the Judgment Creditor

G Smith, Judgment Debtor, in person

Judgment:

30 July 2021

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 30 July 2021 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel:
KJ McMenamin & Sons, Christchurch J Moss, Barrister, Christchurch

Copy to:
G Smith, Auckland

PRAIN v SMITH [2021] NZHC 1949 [30 July 2021]

Introduction

[1] Mr Prain has brought bankruptcy proceedings against Mr Smith relying on the failure to pay a costs judgment of $86,661.40 plus disbursements of $1,270. The costs award was made following Mr Prain and Cardno (NZ) Ltd’s successful strike out of proceedings brought by Mr Smith and Mr Colin Stokes.

[2] Mr Smith and Mr Stokes first brought the proceedings in 2014 against a number of parties including Noble Investments Ltd and Apple Fields Ltd for breach of a 2002 contract relating to the purchase of land by Mr Smith and Mr Stokes in a subdivision to be completed by Noble. Apple Fields was the company used by Noble to manage the development of the subdivision. Mr Prain, the director of Apple Fields, was joined as the third defendant and Cardno, a company engaged by Noble to acquire the requisite consents and assist in the planning, as the fourth defendant.

[3] Noble and Apple Fields were removed as first and second defendants following Noble’s liquidation and the removal of both from the Companies Register. Other defendants were also removed following successful summary judgment applications.1

[4]The proceedings continued against Mr Prain and Cardno.

[5] By the time the application for strike out was filed in December 2019, the statement of claim had been amended six (or seven) times.2 The application for strike out succeeded because, despite amendment, the pleadings still failed to disclose a reasonably arguable cause of action because of the failure to give particulars in relation to the alleged dishonest misrepresentations and because the claim in negligence against Cardno was found to be untenable. Furthermore, Associate Judge Lester stated that he would have dismissed the proceeding for want of prosecution under r 15.2 of the High Court Rules had he not been persuaded that it should be struck out.3

1 Smith v Noble Investments Ltd [2020] NZHC 1236 at [26].
2 Smith v Prain [2020] NZHC 1766 at [41].
3 At [2].

[6]Following the strike-out, Associate Judge Lester awarded costs to Mr Prain of

$86,661.40 plus disbursements to be fixed by the Registrar. The costs award was calculated on a 2B basis plus an uplift of 40 per cent. The uplift was applied because Associate Judge Lester considered Mr Smith and his co-plaintiff, Mr Stokes,…

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 Prain v Smith

Details

AGLC: Prain v Smith [2021] NZHC 1949
Case: [2021] NZHC 1949
Decision Date: 30 July 2021

CaseChat Overview and Summary

The case of Prain v Smith involved bankruptcy proceedings brought by Mr Prain against Mr Smith, relying on Mr Smith's failure to pay a costs judgment of $86,661.40 plus disbursements of $1,270. The costs award was made following the successful striking out of proceedings brought by Mr Smith and Mr Colin Stokes. The primary legal issues were whether the judgment creditor had proved a prima facie case for adjudication and whether there was any reason not to adjudicate Mr Smith bankrupt now. The Court found that there was a prima facie case for adjudication as the debt was over $1,000, an act of bankruptcy had occurred, the debt was for a certain amount, and the debt was payable either immediately or at a certain future date. However, the Court decided to halt the adjudication proceedings due to the ongoing appeal of the costs award, the lack of information provided by the judgment creditor regarding the actual costs incurred, and the potential unreasonableness of the creditor's actions in pursuing adjudication. The Court ordered that the proceedings be halted until the appeal of the costs award is finally heard and determined.

The final orders of the Court were to halt the adjudication proceedings pursuant to s 38 of the Insolvency Act 2006 until the appeal of the costs award is finally heard and determined. The parties were directed to confer on costs and, if agreement could not be reached, to file memoranda.

Orders