Sigglekow v Turner

[2012] NZHC 3334

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002214 [2012] NZHC 3334

IN THE MATTER OF     the Insolvency Act 2006

AND

IN THE MATTER            of the Bankruptcy of Noeline Jane Turner

BETWEEN  CHRISTELLE JANE SIGGLEKOW Judgment Creditor

ANDNOELINE JANE TURNER Judgment Debtor

Hearing:         11 December 2012 (Heard at Christchurch)

Appearances: A J Davis  for Judgment Creditor

L N Adams for Supporting Creditors Namel Ltd and QBE Insurance Ltd

No appearance by Mrs Turner

Judgment:      11 December 2012

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to setting aside a bankruptcy notice]

[1]      Mrs  Turner  has  applied  to  set  aside  a  bankruptcy  notice  issued  by  Ms Sigglekow.  This is her application.  It was to be heard in the List at 10.00 am this morning as recorded on the application served on Ms Sigglekow’s solicitors.  Mrs Turner has not appeared.   I stood the matter down to the end of the List.   As I commence this judgment at 10.35 am, Mrs Turner has still not appeared and Mr

Davis asks that the Court now deal with the proceeding on the merits.

SIGGLEKOW V TURNER HC CHCH CIV-2012-409-002214 [11 December 2012]

[2]      Ms Sigglekow is the first defendant in a proceeding in which Mrs Turner sues a number of defendants for damages (CIV-2006-409-001172).

[3]      Earlier this  year,  in  the damages  proceeding,  Ms  Sigglekow successfully applied for security for costs against Mrs Turner.  In accordance with the principles stated in High Court Rule 14.8 the Court ordered Mrs Turner to pay the costs and disbursements of the application on a 2B basis in a total of $5,620.30.  The Court’s order is dated 17 August 2012 and was sealed on 11 September 2012.

[4]      There is no suggestion that the execution of the costs order has been stayed.

Grounds of setting aside application

[5]      Mrs Turner filed her own application in which she sets out six grounds which

I summarise:

(a)      The  judgment  pursuant  to  which  the  bankruptcy  notice  has  been issued as an interlocutory judgment and not a final judgment;

(b)Mrs  Turner  has  a  counterclaim  and  cross-demand  against  Ms Sigglekow which could not be set out in the proceeding in which Ms Sigglekow   obtained   the   judgment   because   the   judgment   was concerned only with an interlocutory application for security for costs. In the substantive proceeding Mrs Turner says that she has a valid cross claim for the liquidated amount of $67,000 plus interest being the return of real estate commission and an undisclosed secret profit;

(c)      The bankruptcy notice is issued for an ulterior motive, driven by the creditor’s solicitor rather than the creditor herself, the motive being to defeat Mrs Turner’s claim against the creditor in the substantive proceeding;

(d)      The bankruptcy notice is not issued for a genuine, legal purpose of

equally distributing Mrs Turner’s assets;

(e)      The judgment debt owed by Mrs Turner to the  creditor has  been caused by the creditor’s own acts and omissions to pay money owing to Mrs Turner;

(f)      The bankruptcy notice amounts to an abuse of legal procedure by the creditor and her solicitor.

[6]      Mrs Turner has filed an affidavit in support of her application.  The affidavit closely parallels and re-states the grounds set out in her application.

[7]      Additionally, Mrs Turner states in her affidavit that she wishes to make an application for legal aid and would advise the Court when counsel had been appointed.  No such advice has been received.

The grounds of opposition

[8]      Ms Sigglekow has filed a notice of opposition in which she states three particular grounds:

(a)       The bankruptcy notice has been issued pursuant to the Court’s order

dated 17 August 2012, and remains unpaid;

(b)Mrs Turner does not have a counterclaim or cross-demand for a sum in excess of the amount claimed by Ms Sigglekow in the proceeding;

(c)       Ms Sigglekow is entitled to enforce the costs order.

[9]      For  Ms  Sigglekow,  an  affidavit  in  opposition  was  provided  by  Leonard Mulinder.  Mr Mulinder states that he is the solicitor employed by Ms Sigglekow’s solicitor’s firm and was authorised by her to make the affidavit in opposition.  He deposes to matters in support of the grounds of opposition.

[10]     Section 17 Insolvency Act 2006 defines the circumstances in which a debtor commits an act of bankruptcy.  It provides:

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),—

(i)       complied with the requirements of the notice; or

(ii)      satisfied the Court that he or she has a cross claim against the creditor.

[11]     “Cross claim” as referred to in s 17(1)(d)(ii) is defined in s 17(1)(7):

(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.

Discussion of final judgment or order

[12]     High  Court  Rule  14.8  requires  that  costs  on  an  opposed  interlocutory application (which this was) are, unless there are special reasons to the contrary, to be fixed in accordance with the High Court Rules when the application is determined and to become payable when they are fixed.

[13]     Mrs Turner says that the judgment of 17 August 2002 ordering her to pay costs and disbursements of $5,620.30 to Ms Sigglekow is not a final judgment. She

bases  this  submission  on  the fact  that  the costs  order arose in  an  interlocutory proceeding.

[14]     The  concept  behind  Mrs  Turner’s  submission  can  also  be  seen  in  the discussion of Doogue J in Potemkim v Protector Safety Ltd,1 in which the question as to whether an interlocutory order is a final order was left open.  His Honour said:

… I do not find it necessary to enter upon an examination of whether the order which the creditor seeks to enforce is a final or interlocutory order.  It is true that the order itself is an interlocutory order but it may be arguable that the order for costs arising out of the interlocutory order is itself a final order but, having regard to the view I take of the matter, I do not have to reach a conclusion on that point.

[15]     To be contrasted with Potemkin is the decision in Re Dempster ex p Auckland District Law Society.2      In that case the Society had obtained an injunction against the defendant and was awarded costs.   The debtor sought an order setting aside a bankruptcy notice issued in relation to the costs judgment.  Amongst other grounds, he disputed the finality of the judgment.  Master Gambrill found that the injunction and costs order had disposed of the rights of the parties and had dealt with all matters

before the Court between the parties.  To that extent the case may be distinguished from this in that one aspect of the interlocutory order in this case, namely the order for security, is plainly interlocutory and does not finally dispose of the rights of the parties.   On the other hand, the costs order fits within the test, applied by Master Gambrill, which was identified in Bozson v Altrincham Urban District Council.3

[16]     The test is stated thus:

Does the judgment or order, as made, finally dispose of the rights of the parties?  If it does, then I think it ought to be treated as a final order; but if it does not, it is then, in my opinion an interlocutory order.

[17]     The costs regime in relation to interlocutory applications, pursuant to r 14.8 – whereby the usual expectation is that costs must be fixed immediately in which event they become immediately payable – reinforces the view that an order for such costs

constitutes a final order.

1      Potemkim v Protector Safety Ltd HC Auckland B 1106/86, 10 September 1986.

2      Re Dempster ex p Auckland District Law Society HC Auckland, B959/95, 27 November 1995.

3      Bozson v Altrincham Urban District Council (1903) 1 KB 547 at 548.

[18]     Mrs Turner has, in relation to the security for costs judgment, applied for leave to appeal.  That does not alter the final nature of the judgment generally or of the costs order within it: see Marchiorness of Huntly v Gaskell [1905] 2 Ch.656 (CA). Unless an order is made staying execution of the costs order or the entire judgment (as may be done under the Court of Appeal Civil Rules 2005, r 12), the status of the costs order as a final, enforceable order remains. In relation to an ordered sum of costs which the High Court Rules makes immediately payable, there is the quality of finality which lends itself to all enforcement processes including the issuing of a bankruptcy notice.

The assertion of a cross claim

[19]     Mrs Turner asserts a cross claim which she could not have set up on the application  for  security  for  costs.    I accept  that  it  is  in  the  nature  of  such  an application that it was not the context for a set off or cross claim relating to the substantive issues in the proceeding.

[20]     It is for Mrs Turner, applying to set aside a bankruptcy notice, to provide the Court with a proper basis of evidence, short of proof, as to the matters of cross claim she would set up.  Her evidence on this application falls well short of such a test. What she has deposed is mere assertion.  Essentially all she has done is referred to her substantive pleadings as amounting to a cross claim.  That does not satisfy the onus upon her in an application of this nature.

Motives of the creditor and her solicitor

[21]    Mrs Turner attributes various motives or lack of lawful purpose to Ms Sigglekow and her solicitor.  The bankruptcy notice is described as having been used for an ulterior purpose (namely to defeat the damages claim) and is not having been issued for a genuine legal purpose of equal distribution of Mrs Turner’s assets.

[22]     The Court has from Mrs Turner no details or evidence of an improper motive such as might lead to a finding of abuse of process.   Mrs Turner has failed on a relatively ordinary interlocutory proceeding and has been ordered to pay costs in the

way expected by the Rules.   The costs are immediately payable.   The creditor is entitled to issue a bankruptcy notice which will then serve as evidence of Mrs Turner’s insolvency if it is not met.   Even were it to be established (either as a probability or on a lower standard) that the creditor or her solicitor had other motivations in pursuing the bankruptcy notice procedure, that would not of itself deprive the procedure of its appropriateness.

[23]     To the extent that Mrs Turner asserts that the notice has not been issued for the genuine, legal purpose of equally distributing the judgment debtor’s assets, there is simply no evidence to indicate one way or the other what expectations the creditor has of distribution from Mrs Turner’s estate should Mrs Turner be adjudicated bankrupt.  The legal position would be that, after meeting preferential payments, the Assignee  would  distribute  any  assets  proportionately.    Ms  Sigglekow  and  her solicitor must be taken to know that.  If, on the other hand, Mrs Turner’s concern is that she may be obliged by the demand contained in the bankruptcy notice to meet the debt to Ms Sigglekow ahead of any debts to other parties, that is simply an event which follows from the diligence with which particular creditors pursue their rights, including the right to issue a bankruptcy notice.   In any event, all creditors are subject to the voidable preference regime in the event the debtor is shortly afterwards adjudicated bankrupt.

Cause of judgment debt

[24]     Mrs Turner has invoked the principle (particularly applicable in applications for security for costs) that the applicant for relief may be denied relief where the respondent’s financial predicament has been arguably brought about by the acts or omissions of the applicant.

[25]     This is a principle particularly applicable to and relevant in situations such as security for costs.   It has little or no application in relation to the present context. The costs order would have been made by the Court taking into account all considerations relevant to the making of the costs order.   It is not for this Court effectively to go behind the costs order and to consider and investigate whether some acts or omissions of Ms Sigglekow contributed to problems which then led to the

substantive proceeding or indeed led to the application for security for costs.  This is a straightforward case of a judgment debt pursuant to which a bankruptcy notice has been issued.

Outcome

[26]     None of Mrs Turner’s grounds of application amounts to a justification to set aside the bankruptcy notice.  Her application must be dismissed.

Costs

[27]     The usual rule is that costs should follow the event.  Mr Davis seeks costs on that basis on a 2B basis. There is no reason not to adopt that approach in this case.

Orders

[28]     I order:

(a)       The application dated 31 October 2012 is dismissed;

(b)      The time for payment pursuant to the bankruptcy notice is extended to

24 December 2012, in default of which payment Ms Sigglekow will be entitled to present an application for adjudication;

(c)       The debtor is to pay costs to the creditors on a 2B basis together with disbursements to be fixed by the Registrar.

Associate Judge Osborne

Solicitors:

Clark Boyce, PO Box 79122, Christchurch

Chapman Tripp, PO Box 2510, Christchurch 8140

Copy to:

Mrs N J Turner, 53a Inwoods Road, Christchurch