Simpson v Scott HC Tauranga CIV-2010-470-000690

[2011] NZHC 782

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2010-470-000690

UNDER  the Insolvency Act 2006

BETWEEN  DAVID MAVITTY SIMPSON Creditor

ANDLEWTYN MICHAEL SCOTT Debtor

Hearing:         22 July 2011

Appearances: Mr Simpson for Creditor

Mr Scott in person

Judgment:      22 July 2011

ORAL JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

Solicitors:

Simpson Aspen Law, Tauranga – [email protected]

Gary M Harrison, Auckland – [email protected]
ECD Legal, by email:  [email protected]

Mr Scott, by email:   [email protected]

SIMPSON V SCOTT HC TAU CIV-2010-470-000690 22 July 2011

[1]      Included in the bankruptcy list of matters for me to hear today is the claim application by Mr D M Simpson for an order adjudicating Mr L N Scott bankrupt. The proceeding has a long history.   I issued a judgment in the matter on 29 June

2011, in that judgment I dealt with grounds of defence that had been raised by Mr Scott to the creditor’s application.  Essentially their ground of defence was that Mr Scott had a claim against Mr Moody and Mr Simpson arising out of representation provided principally by Mr Moody in negotiating with other members of his family for  a  resolution  of  a  family  dispute  involving  a  farm  and  other  properties  at Tauranga.

[2]      The work for which Mr Scott was billed was carried out between May 2005 and March 2007, according to the judgment of Judge P S Rollo in the District Court. In that Court judgment was entered against Mr Scott in May 2010, the amount of judgment was $34,500 together with costs and disbursements.  On 16 August 2010 a bankruptcy notice was served on Mr Scott based on the judgment which expired unsatisfied.  On 16 December 2010 I gave a judgment on Mr Scott’s application to set aside the bankruptcy notice.   I disallowed that application.   The creditor then brought  these  proceedings  and  those  too  were  opposed  by  Mr  Scott.    In  his application he said that he had a defence, set-off and/or genuine triable counterclaim that exceeded the amount claimed and he said he was solvent.

[3]      In the judgment that I delivered 29 June 2011 I concluded that the claim that Mr Scott intended to bring against the creditors was unclear and lacked particulars and there was no basis upon which he could successfully oppose the application for a bankruptcy order, I also rejected his assertion that he was solvent.

[4]      I adjourned the bankruptcy application to give Mr Scott a last chance to make payment.  He has appeared today to seek a stay of the bankruptcy proceeding on the grounds that he has filed an appeal against my judgment.   He said in an affidavit sworn on 22 July 2011 that he had filed and served a notice of appeal.  Enquiries that the Registrar at Tauranga made with the Registrar of the Court of Appeal indicate that an appeal was filed today.

[5]      Earlier this week I convened a case management conference to consider the proceedings that Mr Scott has now brought against Messrs Moody and Simpson.  I noted that the defendants were seeking particulars of the claim and I made certain timetable orders in respect of that.   The circumstances of that case management conference have no significance at all to the present application although Mr Scott said he considered that the terms of my minute were contradictory to my earlier judgment.

[6]      Interestingly, Mr Scott alternatively sought time today to make payment. This was alternative to the appeal point.  He said that he was waiting for funds to be received from the IRD by way of a GST refund which would enable him together with funds from other sources to clear the amount that was owing to the creditor. This in my view is further material that supports my conclusion that he is not solvent.

[7]      But the main issue that he raises relates to the jurisdiction of the Court to halt or refuse adjudication where the judgment is under appeal.   Section 42 of the Insolvency Act 2006 does not apply because there is no appeal against the judgment or order underlying the bankruptcy notice.  However, I shall assume for the purposes of argument there is power to grant a stay pending appeal on the basis that Mr Scott has brought an appeal against my judgment of 29 June 2011 even though it did not result in an adjudication order being made.

[8]      However  even  if  there  is  such  an  assumed  jurisdiction  I  would  not  be prepared to exercise any discretion in favour of Mr Scott.  As Lang J said in Wright v Health Distributors Limited.1    One of the matters that is relevant is the question of prejudice to the creditors arising from the delay that will inevitably occur if the proceeding is halted to enable Mr Scott to pursue his appeal.  I agree that if Mr Scott is adjudicated bankrupt it will probably prevent him from prosecuting the claim

against Messrs Moody and Simpson which is the subject of the proceedings on

which I convened the case management conference earlier this week.    As Lang J

said in Wright v Health Distributors Limited:

The fact that Mr Wright is likely to be prejudiced in this way is not determinative in any event.  Every debtor in Mr Wright’s position faces the same difficulty.  Had Parliament wished to make the existence of an appeal an automatic ground for halting bankruptcy proceedings, it would have been a simple matter for it to have said so.  The fact that Parliament has left the matter  to  the  Court’s  discretion  recognises  that  the  existence  of  an outstanding appeal will not, of itself, necessarily be sufficient to justify the Court halting bankruptcy proceedings.2

[9]      The judgment of the District Court has now been in place since May 2010.  It has not been attacked on appeal.   The question of Mr Scott having a cross claim, counterclaim or set-off has been explored in other proceedings before me and I have concluded  that   the  claim   is   imprecisely  and   imperfectly  articulated   in   the proceedings which Mr Scott has brought it.  I do not consider there is any reasonable basis for concluding that Mr Scott can establish that he is able to obtain damages which can be set off against the original judgment on which the bankruptcy notice was founded.   To allow further delays in this matter while an appeal is pursued would ignore the interests of the creditors who commenced proceedings against Mr Scott to recover these costs as long ago as 2007.   For those reasons I decline to further adjourn this matter and the proceeding is to go ahead today.  The only matter I reserved for consideration today was whether Mr Scott had taken advantage of the opportunity that I gave him to make payment or secure it in some way.  He has not done that and in my view the Court should now make an order adjudicating him bankrupt which I do.

[10]     The creditor will have costs on a 2B basis and disbursements as fixed by the

Registrar.

[11]     This order is made at 1.27 p.m. 22 July 2011.

J P Doogue

Associate Judge