Rooke v Chang-Hooker

[2013] NZHC 2907

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-6260
CIV-2012-404-6263

CIV-2012-404-6274 [2013] NZHC 2907

UNDER	Insolvency Act 2006
UNDER	District Courts Act 2009
IN THE MATTER	of the Insolvency Act 2006
AND IN THE MATTER	of the Bankruptcy of SANDY YINONG CHANG-HOOKER
BETWEEN	DAVID JOHN ROOKE Judgment Creditor
AND	SANDY YINONG CHANG-HOOKER Judgment Debtor

Hearing:	16 April 2013
Appearances:	D Wu for Judgment Creditor S Chang-Hooker in person
Judgment:	5 November 2013

RESERVED COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 5 November 2013 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:

David Rooke Law Office, Manukau

ROOKE v CHANG-HOOKER [2013] NZHC 2907 [5 November 2013]

[1]      Though  a  fixture  was  allocated  for  a  defended  hearing  of  the  judgment creditor’s application for an order of adjudication, the application did not proceed on a defended basis.   On the day of the hearing the application was struck out by consent, as the two remaining judgment debts ($2490.50 and $1,138.50) on which the application was based were paid on the previous day. The other judgment debt on which the judgment creditor based his application was the original judgment debt for

$32,339 which was satisfied on 3 April 2013, by execution of a distress warrant. The judgment creditor applied for the warrant in mid February 2013 and it was issued by the Manukau District Court a few days later.

[2]      The one outstanding matter in these proceedings is the question of costs on

the judgment creditor’s application.

[3]      Costs are opposed.   The issue for determination is whether the judgment creditor is entitled to an order for costs and, if so, whether costs should be 2B costs or, as the judgment creditor argues in the alternative, increased costs.

Discussion

[4]      Whether or not the judgment creditor should have an order for costs is in the court’s discretion. As the judgment creditor’s application was struck out the issue is whether he acted reasonably in making and pursuing an application for adjudication and  whether  the  judgment  debtor’s  conduct  was  unreasonable.1  The  Court  may refuse to make an order for costs if it is satisfied that reasons exist which make such an approach justifiable.2

[5]      The judgment creditor’s application for an order for adjudication was based

on three unpaid judgment debts owed to him by the judgment debtor.

[6]      It is clear that at the time the judgment creditor filed the application the jurisdictional requirements for an order of adjudication existed in that:

1  North Shore City Council v Local Government Commission (1995) 9 PRNZ 182. Although this current situation involves a strike out, this is analogous to a discontinuance.

2 High Court Rules, r 14.7.

(a)       Ms Chang-Hooker owed the three judgment debts, each exceeding

$1,000,

(b)She had not taken steps to formally oppose the bankruptcy notice on which the judgment creditor based his application,

(c)       An act of bankruptcy occurred within three months proceeding the filing of the application.

(d)      Each judgment debt was for a certain amount, and it was due.

[7]      Given that the jurisdictional requirements existed, the judgment creditor was prima facie entitled to make an application for an order of adjudication.  There is no substance therefore to the judgment debtor’s argument that the judgment creditor was not legally entitled to commence bankruptcy proceedings.

[8]      Moreover, at first glance, the judgment creditor acted reasonably in the proceeding  with  the  application.    There  is  nothing  in  the  judgment  debtor’s documents in opposition establishing her solvency.  The judgment debtor’s grounds of opposition centred on her strongly held but untenable reasons for believing that she should not have to pay the judgment debts on which the bankruptcy notices and the application for adjudication were based. These included her hope that by one means or  another she  would  be  able to  demonstrate that  the original  judgment against her, which has led to orders resulting in the judgment debts, would be set aside and that her position would be vindicated. She still remains hopeful of this outcome and asserts that the judgment creditor should not have pursued enforcement by any means until she has exhausted all avenues of challenge.

[9]      However as counsel for the judgment creditor submitted the judgment debts were made in final judgments.  There were no extant appeals against them. No stay had been ordered that would deprive the judgment creditor of the right to proceed with enforcement proceedings based on the acts of bankruptcy that occurred when the bankruptcy notices were not complied with.  Such attempts as there have been at

obtaining a stay have failed. These factors weigh in favour of an order for costs to compensate the judgment creditor for the steps he has taken.

[10]     The only issue of substance that the judgment debtor has raised in opposition to an order for costs is whether, as she contends, the judgment creditor in actual fact had knowledge of or a belief in her solvency - in which case it may be argued that the judgment creditor should have desisted from pursuing her adjudication.

[11]     She says that she had the financial resources to pay the judgment debts and that this is borne out by the successful execution of the distress warrant on her bank account. This satisfied the original judgment debt. She fairly asks the question why the judgment creditor, who had previously acted as her solicitor, took the step of seeking a distress warrant to obtain funds in her account if he did not believe that she had the funds, and why he obtained another warrant in respect of her Mercedes-Benz car when he was asserting at the same time that she was insolvent.

[12]     I  accept  that  even  if  solvency  is  not  pleaded,  the  judgment  creditor’s knowledge of or belief in an unrepresented judgment debtor’s solvency is relevant to the issue of whether the judgment creditor should have an order for costs for steps taken to seek an order of adjudication.  If the creditor had such knowledge or belief then that goes to the reasonableness of the steps he took.  The threat of adjudication should not be used against a debtor who is known or believed to be solvent but is simply unwilling to pay.   Generally, in such circumstances, the judgment creditor should seek more appropriate means of enforcing debts.

[13]     I do not accept that the judgment creditor necessarily had knowledge of the judgment debtor’s solvency. It is possible he did not. However, I do accept that the judgment debtor has raised real questions about the appropriateness of the judgment creditor’s pursuit of an order of adjudication while pursuing other steps as a means of enforcement at the same time.

[14]     As counsel for the judgment creditor accepted, with some reluctance, it could be inferred from the various enforcement steps that the judgment creditor was taking that he believed the judgment debtor was solvent. Counsel appeared to accept, and I

find, that there is an incongruity between those steps and pursuing an order of adjudication. On the one hand it can be inferred that the judgment creditor believed it was proper to pursue payment by execution on a bank account and other readily realisable assets: on the other by his adjudication proceeding and verifying affidavit he displays the belief that the judgment debtor is insolvent and unable to pay her creditors. In the latter case the objective is to secure what assets the debtor has for the benefit of all creditors.   Counsel for the judgment creditor submitted that the judgment debtor had no excuse for not paying the debts given she had the resources to do so.  He also submitted that she had the resources to instruct a lawyer and had she done so and filed a statement of assets and liabilities earlier in the piece the judgment creditor would have responded appropriately at a much earlier date.  In the circumstances, he submits, the costs that the judgment creditor has been put to are largely due to judgment debtor’s conduct.  She has put him to unnecessary cost.

[15]     While I have some sympathy with the judgment creditor and the frustration he has clearly experienced in his endeavours to enforce payment of the judgment debts, I am left with the impression that he resorted to the threat of adjudication to secure payment from an unwilling debtor whom he believed to be solvent.

Result

[16]     Weighing all of the circumstances, I am satisfied that the fairest and proper course is for costs to lie where they fall.  I order accordingly.

H Sargisson

Associate Judge