Remmington v Coupe
[2022] NZHC 426
•11 March 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000310
[2022] NZHC 426
UNDER Insolvency Act 2006 IN THE MATTER OF
The bankruptcy of AARON PETER COUPE
BETWEEN
BRIAN GREGORY REMMINGTON
Judgment Creditor
AND
AARON PETER COUPE
Judgment Debtor
CIV-2021-404-000311 UNDER
Insolvency Act 2006
IN THE MATTER OF
The bankruptcy of AARON PETER COUPE
BETWEEN
NZ CASTLE RESORTS & HOTELS
LIMITED and THE CASTLE GROUP, INC
Judgment CreditorsAND
AARON PETER COUPE
Judgment Debtor
Hearing: 3 March 2022 Appearances:
S E Cameron for Judgment Creditors Judgment Debtor in Person
A C Stone and T D Mahood for Hudson Gavin Martin, a supporting creditor (notice of appearance)
Judgment:
11 March 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
REMMINGTON v COUPE [2022] NZHC 426 [11 March 2022]
Introduction
[1] The two judgment creditors, Mr Remmington and NZ Castle Resorts & Hotels Ltd and The Castle Group Inc,1 seek to adjudicate Mr Coupe2 bankrupt. The petitions are based on an alleged failure by Mr Coupe to comply with two Bankruptcy Notices. Both Bankruptcy Notices are based on unpaid costs orders awarded against Mr Coupe following unsuccessful litigation in this Court.
[2] In response, Mr Coupe suggests that the costs orders have in fact been paid and contends that he has a valid counterclaim based on a Stand Still Agreement3 entered into between himself and a third party. Mr Coupe says it is arguable that the third party, Greys Avenue Partners, LLC,4 has paid the outstanding judgment debt.
[3]The critical issues I must determine are as follows:
(a)Whether there is any credible basis for Mr Coupe’s contention that both judgment debts have been paid. This involves the consideration of r 24.20 of the High Court Rules 2016 (solicitor’s certificate as to unpaid debt) and Ms Cameron’s certificates of 3 March 2022; and
(b)Whether, as a matter of discretion under ss 36 and 37 of the Insolvency Act 2006, I should decline to adjudicate Mr Coupe bankrupt because he has a credible counterclaim that should first be heard and determined.
Background facts
[4] Both sets of High Court proceedings that resulted in the two costs orders arose out of the failure of a joint venture between Mr Coupe and his interests and Mr Gary Oda, an American individual, and his company, GAP.
1 Castle.
2 Judgment debtor.
3 SSA.
4 GAP.
[5] I adopt the following paragraphs from the costs judgment of Downs J of 3 September 2020, the basis of the Castle judgment debt.5
[2] Mr Coupe’s claim concerned a failed joint venture to develop and operate a hotel in Greys Avenue, Auckland.6 Ascent Industries No.33 Ltd7 was the initial corporate vehicle. Its shareholders are Greys Avenue Investments Ltd, or GAIL, and Greys Avenue Partners LLC, or GAP. Mr Coupe is the sole shareholder of GAIL; Mr Oda, the sole shareholder of GAP. Mr Oda is a shareholder of Castle Group, a Hawaiian-based company. Castle Group owns NZ Castle.
[3] GAIL owned the property. It agreed to transfer the property to Ascent. GAP agreed to fund Ascent, so Ascent could turn the property into a hotel. NZ Castle and Ascent entered a hotel management agreement in contemplation of the property being that. NZ Castle was also allegedly responsible for joint venture finances, employing some staff, and negotiating the first agreement.8
[4] Things did not go well. The transfer of the property to Ascent encountered difficulties. These culminated in GAP and Castle Group bringing a claim, in Hawaii, against Mr Coupe and the director of GAIL. The claim was abandoned when a new joint venture vehicle was created, Liberte Investments Ltd.9 Liberte’s shareholders are Mr Coupe and GAP. Liberte agreed to buy the property from GAIL. However, this never occurred and the Bank of New Zealand Ltd sold the property at a mortgagee sale. GAP and Castle Group brought a second claim in Hawaii against Mr Coupe. It too is now abandoned.
[5] Mr Coupe, GAP and GAIL blame each other for the losses. NZ Castle and Castle Group, the Castle defendants, say this has nothing to do with them as their role was confined to hotel management.
[6]Downs J awarded costs against Mr Coupe in favour of Castle in the sum of
$27,485 and disbursements.
[7] In the second proceedings, Mr Coupe alleged that Mr Remmington had breached his duties as a director of the company Liberte Investments Ltd. That was a company to be owned by GAP and Mr Coupe as part of a last-ditch attempt to resurrect the joint venture.
5 Coupe v Learmonth [2020] NZHC 2281.
6 The property.
7 Ascent.
8 These aspects are disputed by NZ Castle and Castle Group.
9 Liberte.
[8]By consent, Mr Remmington obtained a costs order against Mr Coupe for
$14,818 plus disbursements of $770, following a successful application by Mr Remmington to strike out Mr Coupe’s proceedings against him.10
[9] Castle and Mr Remmington issued Bankruptcy Notices against Mr Coupe in October 2020. Those notices were not enforced and have lapsed.
[10] In December 2020, Mr Coupe and GAP entered into the SSA. Mr Oda signed on behalf of GAP.
[11]Mr Coupe relies on the following paragraphs of this agreement:
(a)The following recital in the preamble:
Whereas, at the request of GAP, Castle and Remmington, have agreed to temporarily refrain from enforcing the award of increased costs and disbursements and Jerry Ruthruff (Ruthruff) has agreed to stay his pending lawsuit against Coupe.11
(b)Clause 1 which reads:
GAP agrees to take all actions as may be necessary to cause Castle and Remmington to refrain from enforcing their respective awards of increased costs and disbursements against Coupe and for Ruthruff to stay his pending lawsuit against Coupe until determination of the “Standstill Period” as hereinafter defined.
(c)Clause 5(i) and (iii) which read:
“The Standstill Period” is the period commencing as of the date hereof and ending on the earlier to occur of the following:
(i)Any portion of the amounts owed pursuant to the Hawaii judgment remains unpaid and has not been recovered by November 30, 2021.12
…
10 Coupe v Remmington [2020] NZHC 2122 at [25]. In that judgment Jagose J also refused leave for Mr Coupe to bring proceedings under s 165 of the Companies Act 1993 in the name of or on behalf of Liberte Investments Ltd.
11 Mr Ruthruff is GAP’s US attorney. He is also a director of The Castle Group. He is not a director of NZ Castle Resorts & Hotels Ltd, and has never acted for either judgment creditor.
12 The Hawaii judgment is referred to in the preamble as the judgment entered against Mr Coupe in favour of GAP in the amount of $2,069,929.27 on 11 March 2020 by the circuit court of the First Circuit, State of Hawaii, USA.
(iii) The commencement or continuation of any lawsuits or other legal proceedings against GAP, Castle, Castle Resorts & Hotels Inc, a Hawaii corporation, or any member, manager, officer, director, employee or agent of any said entities arising from or in any way connected with GAIL, the Greys Avenue property, the hotel conversion project, Assent or Liberte.
[12] On 15 March 2021, Castle and Mr Remmington issued fresh Bankruptcy Notices against Mr Coupe. It is those fresh notices which form the basis of the current proceedings.
[13] These proceedings were scheduled for a hearing in August 2021, however these did not proceed because of the COVID-19 lockdown.
[14] In a minute dated 13 October 2021, Associate Judge Gardiner further adjourned the proceedings to enable Mr Coupe or a support person to submit to the Court an assessment of his mental capacity, so that a decision could be made as to whether to appoint a litigation guardian to represent him, under r 4.35 of the High Court Rules.13
[15] Mr Coupe failed to comply with the directions of Associate Judge Gardiner to arrange for a psychiatric assessment and to file a memorandum nominating a proposed litigation guardian.
[16] In a minute of 15 December 2021, Venning J directed that if Mr Coupe wished to pursue the appointment of a litigation guardian, he was to file and serve a memorandum containing a psychologist’s report and nominating the proposed litigation guardian by 28 January 2022. However, Mr Coupe chose not to do so.14
[17] In a judgment of 24 February 2022,15 Davison J declined an application by Mr Coupe for orders for discovery and an order that he be permitted to cross-examine the judgment creditors in these proceedings. Mr Coupe has since sought leave to appeal the judgment of Davison J to the Court of Appeal.
13 Minute of Associate Judge Gardiner, 13 October 2021.
14 Minute of Venning J, 15 December 2021.
15 Remmington v Coupe [2022] NZHC 271.
Relevant legal principles
[18]Section 13 of the Insolvency Act 2006 reads:
When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if –
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[19] If the creditor establishes requirements in s 13, the Court retains a discretion whether to adjudicate the debtor bankrupt under s 36.16
[20] The starting point is that the creditor is prima facie entitled to an adjudication order if the jurisdictional facts in s 13 are established.17 The following principles are also relevant:18
(a)The onus is on the opposing judgment debtor to show why an order should not be made;
(b)The Court will consider the interests of those directly concerned (the petitioner, other judgment creditors and the judgment debtor) and also the wider public interest;
(c)The Court will give proper weight to the commercial judgment of the petitioner, but the oppressive use of the bankruptcy process may be a ground for refusing an order;
(d)The undoubted absence of assets may be a ground for declining to grant an order, but will not necessarily preclude an order given the range of
16 See also s 37.
17 Baker v Westpac Banking Corporation CA212/92, 13 July 1993.
18 Baker v Westpac Banking Corporation, above n 16, at 4.
interests involved, including the public interest in the continuing oversight of the bankrupt’s affairs and the disqualifications that go with bankruptcy;
(e)In the end, the Court must balance the various considerations relevant to the case and determine whether the judgment debtor has succeeded in showing an order ought not to be made.
Analysis and decision
Issue (a): Is there any credible basis for Mr Coupe’s contention that both judgment debts have been paid?
[21]Rule 24.20 of the High Court Rules reads:
Applicant creditor’s solicitor’s certificate as to unpaid debt
A certificate by the applicant creditor’s solicitor to the effect that, after having made due inquiries, the solicitor is satisfied that the debt remains unpaid, may be accepted by the court as sufficient prima facie evidence that the debt remains unpaid.
[22] Ms Cameron, solicitor for both judgment creditors, has filed and served two solicitor’s certificates as to unpaid debt. Both are dated 3 March 2022 and record Ms Cameron’s satisfaction that both debts remain unpaid.
[23] Mr Coupe has sought leave from this Court to appeal the discovery interlocutory judgment of Davison J of 24 February 2022 to the Court of Appeal.19 Mr Coupe contends that discovery in these proceedings is essential in order for him to be able to prove that both costs orders have in fact been paid. Mr Coupe argues that the SSA expressly contemplated at cl 1 that GAP and Mr Oda would pay the judgment creditors the outstanding costs awards. He relies upon the wording of cl 1 and particularly the taking of “all actions as may be necessary”. Mr Coupe contends that Mr Remmington and Castle have borrowed money from him and that it is entirely plausible that Mr Oda did pay the outstanding costs awards during the period of the SSA and on behalf of Mr Coupe. Mr Coupe argues that there is a real risk of the judgment creditors “double dipping”. I understand that to mean that having been paid
19 Remmington v Coupe, above n 15.
the outstanding costs orders, the judgment creditors cannot have a second bite of the cherry and seek to adjudicate Mr Coupe bankrupt.
[24] Mr Coupe has attached a screenshot copy of a financial document recording payments made by Mr Oda to his notice of application for leave to appeal to the Court of Appeal. Mr Coupe believes this document supports his contention that Mr Oda may have paid the costs awards.
[25] I reject the arguments advanced by Mr Coupe and find that he has not established a credible basis for challenging Ms Cameron’s certificates as to unpaid debt. There is no basis for me not to accept Ms Cameron’s certificates as sufficient prima facie evidence, under r 24.20, that the debts remain unpaid.
[26] As Ms Cameron submitted, the first time Mr Coupe suggested that the judgment debts have been paid was in his leave to appeal application filed and served on 1 March 2022. These proceedings have now been underway for a considerable time (they have previously been adjourned on at least two occasions) and Mr Coupe has not advanced any plausible excuse as to why this issue is only now being raised. Mr Coupe’s defence of the proceedings has generally been an evolving one and, in my view, this is a further attempt to try and confuse matters. There is no basis to challenge Ms Cameron’s solicitor’s certificates; she is a highly competent professional from a reputable law firm, and allegations by Mr Coupe which in substance challenge Ms Cameron’s integrity, are misguided.
[27] I also note that the terms of the SSA do not expressly require GAP to pay the outstanding costs awards.
[28] Furthermore, it appears that Mr Coupe may be somewhat confused about the difference between the payment by Mr Oda/GAP for the legal fees of the judgment creditors or parties associated with them (denied by both judgment creditors) and the payment of any outstanding costs award. The screenshot document that Mr Coupe relies on simply refers to the payment of solicitors’ fees. In my view, the issue of how and whether the judgment creditors’ solicitors have been paid is simply not relevant. I find that the outstanding costs awards have not been paid and the judgment creditors
are prima facie entitled to an adjudication order, having established the jurisdictional facts in s 13.
[29] The onus thus shifts to Mr Coupe to show why an order for bankruptcy should not be made. I now address that issue.
Issue (b): Exercise of discretion – is there a credible counterclaim?
[30] In his memorandum of 12 July 2021, Mr Coupe contended that the judgment creditors are not entitled to enforce the costs orders because of the SSA. The original written submissions of the judgment creditors dated 11 August 2021 expressly addressed that issue on the basis that, at least at that stage, that was the main ground for Mr Coupe’s defence of the proceedings.
[31] Matters have of course evolved since then. This includes the fact that the SSA has come to an end. On its own terms the “Standstill Period” expired on 30 November 2021 because the “Hawaii judgment” (i.e. judgment entered against Mr Coupe on 11 March 2020 in the sum of $2,069,929.27) remains unpaid. However, although it is not entirely clear, Mr Coupe still appears to rely on the SSA for what he says is a credible counterclaim.
[32] Mr Coupe contends that he could not have relied upon the SSA as a counterclaim in the High Court litigation giving rise to the costs awards because it had not been entered into until after the litigation had finished (it is dated December 2020). He contends that both judgment creditors have “commercialised” the costs awards. I understand that to mean that the judgment creditors have agreed to the costs awards being subject to the enforcement restrictions provided for in the SSA. In reliance on cl 5 of the SSA, Mr Coupe appears to argue that he was precluded by cl 5(3) from challenging the Bankruptcy Notices during the agreed Standstill Period. Mr Coupe says that if the costs awards had not been “commercialised” they would have been paid by now.
[33]Mr Coupe also refers to the fact that he offered to pay the judgment creditors
$4,000 per week in instalments but that the judgment creditors have, for no good reason, refused to engage with him on that proposal.
[34] It is regrettable that Mr Coupe has not been able to provide a clear articulation of his proposed counterclaim, particularly given the expiry of the SSA. In any event, I agree with the submission of Ms Cameron that the SSA is essentially irrelevant; the deadline of 30 November 2021 has now passed. Furthermore, as Ms Cameron submitted, neither of the judgment creditors are a party to the SSA and it could not therefore, in any event, be enforced against them.
[35] Mr Coupe also challenges the Hawaiian judgment entered against him, claiming that it could not be enforced against him here in New Zealand. However, he has failed to put forward any plausible basis for that contention. If the argument is that the SSA is invalid and unenforceable, that provides no assistance to Mr Coupe in defending these proceedings.
[36] Mr Coupe has not brought any counterclaim despite the expiry of the SSA. In all the circumstances, I find that Mr Coupe has failed to persuade me that he has any plausible or valid counterclaim.
[37]The following factors also support the making of orders for adjudication:
(a)The judgment creditors had good reason not to engage with Mr Coupe’s proposal to pay $4,000 per week by way of a repayment programme. He did not provide them with any statement of assets and liabilities. I also note that the supporting creditor, Hudson Gavin Martin, has an outstanding judgment debt against Mr Coupe in the sum of
$181,691.12;20
(b)The GAP Hawaiian judgment of $2,069,929.27 remains unpaid. Mr Remmington has been advised by Mr Ruthruff that GAP intends to enforce the judgment in New Zealand if Mr Coupe is not bankrupted;
(c)Mr Coupe has previously been bankrupt and was subject to a management ban for offences he committed while bankrupt.
20 See Hudson Gavin Martin v Coupe DC Auckland CIV-2021-004-282, 30 July 2021, summary judgment entered against Mr Coupe by consent. Mr Coupe has sought leave from the Court of Appeal to appeal those orders (dated 1 March 2022). The appeal period has of course expired.
[38] I conclude as a matter of discretion that there is no valid basis for declining to make orders of adjudication.
Conclusion
[39] The judgment creditors have established all the jurisdictional facts under s 13 for the making of orders of adjudication. There are no discretionary factors of substance which could justify my refusal to make the orders sought.
[40]I accordingly grant both adjudication applications.
Result
[41]I order that Mr Coupe, the judgment debtor, be adjudicated bankrupt.
[42]My orders are timed at 3.00 pm on 11 March 2022.
[43] As to costs, I accept the submission of Ms Cameron that the judgment creditors should be awarded costs on a 2B basis and in the amounts sought in Ms Cameron’s memorandum of 2 March 2022. It is clear that these have been protracted proceedings, delayed on a number of occasions and that the actual costs incurred by the judgment creditors exceed the scale 2B basis that I am awarding.
Associate Judge P J Andrew
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