Shawyer v Thow HC Invercargill CIV-2010-425-000116

[2011] NZHC 1339

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2010-425-000116

BETWEEN  JOHN COBDEN SHAWYER Applicant

ANDBRENDAN SHANE THOW Respondent

Hearing:         8 and 11 February 2011

Appearances: M J Tingey for Applicant

RAA Weir for Respondent (granted leave to withdraw 23 May 2011) Judgment:      20 October 2011

RESERVED JUDGMENT OF HON JUSTICE FRENCH

Introduction

[1]      This  contempt  proceeding  was  heard  in  February  2011.    Following  the hearing, I reserved my decision.

[2]      Unfortunately, as a result of the Christchurch earthquake on 22 February

2011, the file was trapped in the Court building.   Attempts to recover it in the ensuing months proved unsuccessful.  It was not located until September 2011.

[3]      Meantime, another creditor had issued bankruptcy proceedings against Mr Thow.  Following his being adjudicated bankrupt, I issued a minute indicating that, in  light  of  the  bankruptcy,  I  considered  the  application  for  contempt  had  been rendered academic.  I invited the parties to file submissions if they held a contrary view.

[4]      Since then, counsel for Mr Shawyer has filed a memorandum requesting me to deliver a judgment.

SHAWYER V THOW HC INV CIV-2010-425-000116 20 October 2011

[5]      Judgment accordingly follows.

[6]      I apologise to the parties for the delay and the considerable inconvenience this has no doubt caused them.   Unfortunately, it was due to events beyond my control.

Factual background

[7]      On 3 July 2009, Mr Shawyer obtained an order for specific performance requiring Mr Thow to perform an agreement for the sale and purchase of certain shares.  The order (obtained on a summary judgment application) required Mr Thow to pay Mr Shawyer the sum of $400,000 plus interest from the date of judgment to date of payment.

[8]      Mr Thow resisted payment, citing a lack of funds.  In support of that claim, he provided a statement of his means.

[9]      The statement of means was, however, patently deficient.   Mr Thow, for example, identified his income for 52 weeks as ‘nil’, failed to disclose the existence of certain shareholding interests and recorded the value of an item at cost price rather than current value.

[10]     Mr Shawyer’s lawyers then applied for an order for examination, which was

granted by an Associate Judge on 19 March 2010.

[11]     The order for examination required Mr Thow to produce certain documents at the examination hearing to be held on 15 April 2010.

[12]     Like all the other orders at issue in this proceeding, the order contained a note warning Mr Thow that he must obey the order and that if he did not, he might be sent to prison for contempt of Court.

[13]     The  examination  hearing  was  duly convened  on  15 April  2010.    It  was intended to have been a comprehensive examination as provided for in the High Court Rules.  However, that did not happen.  Mr Thow failed to produce all of the

documents  he  had  been  required  to  produce,  and  failed  to  provide  meaningful answers on relevant questions.

[14]     On 20 April 2010, the Associate Judge issued another minute, ordering Mr Thow to file and serve an affidavit by 6 May 2010, accurately and comprehensively setting out his financial position.   Categories of information and documents were specifically identified.

[15]     The  examination  hearing  itself  was  adjourned  to  a  further  telephone conference, with a view to reviewing the affidavit evidence and determining whether a resumption of the oral hearing would be required.

[16]     On 12 May 2010 Mr Thow filed an affidavit.

[17]     Not only was the affidavit late, but it was still incomplete and inaccurate.

[18]     That triggered yet another application to the Court, and in a minute dated 1

June 2010 the Associate Judge ordered Mr Thow to file and serve a comprehensive affidavit taking into account all previous Court directions and the concerns of Mr Shawyer as identified in his application.

[19]     On 2 September 2010, the day before the examination was due to resume, Mr Thow filed an application for leave to appeal the original judgment out of time, his statutory right of appeal having expired on 3 August the previous year.

[20]     Subsequently, the Court of Appeal dismissed the application for leave as being completely without merit.  It expressed considerable doubt as to whether the appeal had been brought in good faith and noted it appeared to have been brought to obstruct Mr Shawyer’s attempts to enforce the judgment.

[21]   At the examination hearing on 3 September 2010, the extent of the documentation disclosed by Mr Thow was still of concern to Mr Shawyer’s lawyers and to the Court.

[22]     The   parties   reached   agreement   on   the   additional   documentation   and information to be provided.   In a minute dated 8 September 2010, the Associate Judge formally directed Mr Thow to provide the additional agreed documents and information no later than 24 September 2010.

[23]     Mr Thow provided further documents on 12 October 2010.

[24]   The documentation was still not sufficient, and Mr Shawyer’s solicitors requested further information, subsequently becoming aware of shareholding which had never been disclosed, as well as the marketing of a property for sale.

[25]     As at the date of the contempt hearing before me in February 2011, the examination was still incomplete and Mr Shawyer was still unsure of Mr Thow’s true financial position. As Mr Shawyer’s counsel put it, the examination process was not working and so Mr Shawyer needed to turn to a process that would work, namely sequestration.

[26]     The contempt application alleged that Mr Thow was guilty of civil contempt on the basis of his disobedience of:

(i)the original judgment, by failing to pay $482,419, being the amount payable under the judgment;

(ii)      the order for examination dated 19 March 2010; (iii)    the order contained in the minute of 20 April 2010; (iv) the order contained in the minute of 1 June 2010; and

(v)      the order contained in the minute of 8 September 2010.

Relevant legal principles

[27]     It was common ground that a person who disobeys a Court order is guilty of a civil contempt.1

[28]     In order to make out a case for civil contempt, the plaintiff must establish: (a)      That the terms of the relevant orders were clear and unambiguous. (b)      The defendant had proper notice of the terms.

(c)       The defendant has breached the terms.

(d)The  defendant  acted  deliberately.     Wilful  disobedience  is  not necessary.

[29]     The standard of proof of both the conduct and the state of mind required to establish contempt is the high standard of beyond reasonable doubt.

Application of those principles to the facts of this case

[30]     In opposing the application, counsel Mr Weir sought to portray Mr Thow as a man of limited education who was struggling with the process without the benefit of legal representation at all stages.  Mr Weir submitted that Mr Thow was not trying to frustrate the process.  It was simply beyond him.

[31]     I do not accept that submission.

[32]     The evidence satisfied me that Mr Thow did not agree with the original judgment and had no intention of ever paying it.  He admitted as much in evidence to the Associate Judge.  That this was his intention is reflected in the actions he took after the judgment, and his approach to the examination hearings and associated

orders.

1      Solicitor-General v Ms Alice [2007] 2 NZLR 783.

[33]     I am satisfied beyond reasonable doubt that each of the constituent parts of a contempt has been established.  Mr Thow deliberately and flagrantly disobeyed the Court orders, and has committed the five acts of contempt relied upon by the applicant.

Remedy

[34]     At the hearing, the primary remedy sought on behalf of Mr Shawyer was

sequestration, ie the appointment of a sequestrator over Mr Thow’s assets.

[35]     Had it not been for the bankruptcy, I would have ordered sequestration.

[36]     However, the effect of the bankruptcy is that Mr Thow’s assets are now vested in the Official Assignee.  Hence, my suggestion that the contempt application has been rendered academic.

[37]     Mr Tingey submits that although sequestration is impractical, there are a number of other remedies the Court could impose, including imprisonment, a fine and an order for indemnity costs.

[38]     At the hearing, Mr Tingey did not seek imprisonment, and even if he had I would not have imposed it.   In my view, it would be wrong in principle to now impose a custodial sanction because Mr Thow has been bankrupted.

[39]     In light of Mr Thow’s bankruptcy, I am also not satisfied that a fine would be appropriate or serve any useful purpose.

[40]     I do, however, accept that Mr Shawyer is entitled to an order of costs on an indemnity basis.  Mr Shawyer has been put to considerable expense as a result of Mr Thow’s contemptuous behaviour.

Outcome

[41]     I find that contempt has been proved, and order Mr Thow to pay Mr Shawyer his full solicitor/client costs incurred as a result of the contempt proceeding.

[42]     The costs are to be itemised and submitted for approval.

Solicitor:

Bell Gully, Auckland

Copy to B S Thow