Strategic Finance Limited (in receivership and in liquidation) v Moss

[2013] NZHC 2455

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-485-217 [2013] NZHC 2455

BETWEEN  STRATEGIC FINANCE LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

Judgment Creditor

ANDJEFFREY MOSS Judgment Debtor

SPINNAKER CAPITAL LIMITED and REESBY & COMPANY LIMITED Applicants for substitution

Hearing:                   19 September 2013

Appearances:           Ms S Grant for applicants for substitution

Mr D Hurd for Jdugment Debtor

Judgment:                19 September 2013

ORAL JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

Counsel:

Ms S Grant, Shortland Chambers, Auckland

Mr D Hurd, Auckland

STRATEGIC FINANCE LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) v MOSS [2013] NZHC

2455 [19 September 2013]

[1]      There  are  before  the  court  to  applications  for  substitution  as  creditors pursuant to s 44 of the Insolvency Act 2006.   The first is brought by Spinnaker Capital Limited (“Spinnaker”) and the second by Reesby & Company Limited.

[2]      The proposal is that if both creditors are substituted they will proceed against the debtor on a joint application to adjudicate him bankrupt.

[3]      An opposition was filed to the applications for substitution which Spinnaker Capital Limited (“Spinnaker”) and Reesby & Company Limited made.   The point that is essentially at issue on that application was whether they had the necessary standing to be substituted as a creditor pursuant to s 44 of the Insolvency Act 2006. The judgment debtor, Mr Moss took the view that any indebtedness to Spinnaker was disputed and that the dispute was the subject of separate proceedings.  Therefore Spinnaker was not able to establish that it was a creditor of the judgment debtor. The same position was taken by Reesby & Co Limited.

[4]      However  in  the  interim  that  position  was  overtaken  by  events  because Woolford J on 4 September 2013 entered summary judgment against Mr Moss in favour of Spinnaker.   From that point the judgment debtor acknowledged that Spinnaker had standing to accept substitution and withdrew his opposition to an order being made.  He also elected to cease opposing the application by Reesby & Company Limited.

[5]      Today therefore the judgment debtor withdrew opposition to the application to join those parties as substituted creditors.   That position was in fact signalled ahead of today’s hearing.  The position therefore is that the way is now open to make an order substituting the applicants as judgment creditors pursuant to s 44 and I make an order accordingly.

[6]      Two issues arise, the first concerns the question of costs on the application for substitution. The second concerns the next steps to be taken in the proceeding.

[7]      Mrs  Grant  seeks  costs  on  a  2B  basis  in  regard  to  the  application  for substitution.  She invokes the principal stated in r 14.2 that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.  I assume that Reesby & Company Limited also make an application for costs but because I did not obtain complete clarification on that point any application for costs by that party is to be stood over to the next call of the matter.

[8]      Counsel, Mr Hurd and Ms Grant helpfully discussed the authorities relating to  substitution  of  creditors.    Essentially  the  argument  was  about  whether  the judgment  debtor  had  acted  justifiably  in  disputing  that  because  the  debt  that Spinnaker relied upon was denied a substitution order should not be made. Although that  discussion  was  informative  I  think  that  the  fact  that  Mr  Moss  has  now withdrawn his opposition is really decisive of the question.  Any arguments about whether Spinnaker was a judgment creditor for the purposes of the application for substitution were resolved against Mr Moss at the point where that judgment was entered.   He may of course have defences available to him when the insolvency proceedings take their course to a defended proceeding as I mention shortly but I agree with Ms Grant that the principal under r 14.2 is engaged and an order for costs ought to be made in favour of the applicant.

[9]      The  next  issue  concerns  the  costs  scale  and  I  am  satisfied  that  2B  is appropriate.  While the application for substitution was a narrow and focussed type of application such steps are not without their difficulties particularly in cases where, as here, the debtor opposed the substitution and the legal points that the debtor raised were not straight forward and required careful consideration.  Therefore in my view, an order under 2B is justified.

[10]     The next steps from this point now need to be considered.   Spinnaker and Reesby will each have to file an application for adjudication.  When that is done in the usual way the Registry will allocate a first call for that matter.  The judgment debtor will be required to file an opposition in accordance with r 24.18.  The parties agree that that is inevitably what will happen and that therefore a fixture will need to be allocated.   The parties estimate that a one-half day duration hearing will be required.    I  therefore  direct  that  if  the  notice/s  of  opposition  and  supporting

affidavit/s are filed as they are expected to be, there will be no need for counsel to attend on the day.  The Court, without appearance from counsel, will allocate a one half-day fixture with the creditors being required to comply with r 7.39 in regard to synopsis and bundle of documents ten working days prior to the fixture and the

debtor filing a synopsis five working days prior to the hearing.

J.P. Doogue

Associate Judge