Strategic Finance Limited (in receivership and liquidation) v Moss

[2013] NZHC 2158

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-485-000217 [2013] NZHC 2158

IN THE MATTER             of the Insolvency Act 2006

IN THE MATTER             of the bankruptcy of Jeffrey Moss

BETWEEN  STRATEGIC FINANCE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Judgment Creditor

ANDJEFFREY MOSS Judgment Debtor

Hearing:                   23 August 2013

Appearances:           J Caird for judgment creditor

D G Hurd for judgment debtor
S A Grant for parties filing appearances in support

Judgment:                23 August 2013

INTERIM (ORAL) JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

Simpson Grierson, Auckland

Stewart Germann Law Office, Auckland

Duncan Cotterill, Auckland

Counsel:

D G Hurd, Auckland

S Grant, Auckland

STRATEGIC FINANCE LIMITED v MOSS [2013] NZHC 2158 [23 August 2013]

[1]      This  application  for  adjudication,  and  a  cross-application  to  halt  the adjudication have been listed for a defended hearing this morning.

[2]      The judgment creditor and judgment debtor reached agreement to settle the judgment creditor’s claim shortly before the commencement of the hearing.   The judgment creditor seeks leave to withdraw its application (and the judgment debtor does not therefore seek to pursue his application to halt adjudication).  There is no issue over costs.

[3]      Two days ago Spinnaker Capital Ltd filed and served a notice of appearance to support the application for adjudication.  This morning another party, Reesby & Company Ltd did likewise.  Counsel appears for both of these parties and, following the judgment creditor seeking leave to withdraw its application, has made an oral application for substitution of the two further parties as the applicants for adjudication.

[4]      The judgment debtor opposes an order for substitution.  His counsel says that the status of the other parties as creditors is challenged.  I am advised from the bar that both Spinnaker and Reesby claim to be creditors as a consequence of guarantees given by the judgment debtor:

(a)       In  the  case  of  Spinnaker,  the  guarantee  was  given  directly  to  it.

However, the judgment debtor has challenged a claim made upon him under that guarantee by Spinnaker.  The matter was the subject of a defended summary judgment hearing in this Court on Tuesday of this week,  in  which  the  judgment  debtor  raised  several  defences,  and sought relief that includes cancellation of the guarantee.  The Court has reserved judgment.

(b)The claim by Reesby arises out of a guarantee given by the judgment debtor to another party, N M New Zealand Nominees Ltd. Again I am informed from the bar that Reesby contends that N M New Zealand has  assigned  to  Reesby  N  M  New  Zealand’s  rights  under  an underlying obligation (which was supported by the guarantee), and I take  it  that  includes  the  obligation  under  the  guarantee.     An

application for summary judgment by N M New Zealand against the judgment debtor on a claim under the guarantee was also heard in this Court last Tuesday, but on a call, rather than a full defended hearing. Reesby also appeared at that call, and informed the Court that it was now entitled to the balance of debt due to N M New Zealand, and to the rights against the judgment debtor under the guarantee, by assignment.   The Court has set a timetable for Reesby to apply for substitution as plaintiff in that proceeding on the basis that it is assignee of the debt.

[5]      Counsel  for  Spinnaker  and  Reesby  argued  that  an  order  for  substitution should be made now, as this would still leave it possible for their standing to be determined in this proceeding.

[6]      Counsel for the judgment debtor submitted that this was the wrong approach given the claims were already before the Court, and particularly, in the case of Spinnaker, as decision on those claims were likely to determine whether or not the judgment debtor was indeed indebted under the guarantees.  Counsel referred me to the decision of the Court of Appeal in Ronaldson v Dominion Freeholds Ltd.[1]    He accepted on the basis of that authority that it was not necessary for an order for substitution that the debt be a judgment debt,[2]  but said that the critical distinction between that case and the present one was that in Ronaldson (where the Court of Appeal confirmed an order for substitution notwithstanding that the debt was in dispute) there were no contested proceedings already in train.   Against that background the judgment debtor says that neither Spinnaker nor Reesby can be considered to be a creditor, giving it a right to substitution today.

[1] Ronaldson v Dominion Freeholds Ltd [1981] NZLR 132.

[2] Relying on the first paragraph at pg 138 of the decision.

[7]      In order to accede to the  request by counsel for the judgment debtor to dismiss the oral application for substitution, I would need to be satisfied that neither Spinnaker nor  N M  New  Zealand  (and  through  it  Reesby)  is  a  creditor  of the judgment debtor.   Counsel were unable to refer me to any definition of “creditor” within the Insolvency Act 2006. Although, on the basis of the information put before

me today, I consider that there is considerable doubt as to whether it can be said that

at this moment the judgment debtor has a certain debt to either of these parties, I do not feel able to dismiss the possibility that they can be considered a contingent creditor.   If this was a matter under the Companies Act 1993, I would feel comfortable, having regard to definitions and authorities under that Act that both parties would qualify as contingent creditors at least.

[8]      I have discussed with counsel the various options open to the Court, and have decided that the matter should not be determined summarily, as this may simply lead to further applications or appeals and to the dispute being drawn out longer.   The application for substitution should be brought before the Court formally, so that a considered decision can be made on the basis of appropriate evidence and after hearing full argument. That is not possible today (the issue having only just arisen as a  consequence  of  the  settlement  between  the  judgment  creditor  and  judgment debtor).

[9]      In  the  circumstances  I  have  outlined,  I have  come  to  the  view  that  the appropriate course is to adjourn the judgment creditor’s application for leave to withdraw, to make a formal timetable for Spinnaker and Reesby to apply for substitution, and to have both matters determined at the same point.

[10]     I make the following orders:

(a)       The parties seeking substitution are to make a formal application, supported by affidavit evidence, by 4pm on 26 August 2013.

(b)The judgment debtor is to file and serve any notice of opposition, together with affidavits in support of that opposition, by 2 September

2013.

(c)       The Registrar is to allocate a defended hearing (half a day) for the application for substitution at 10am on 19 September 2013.

(d)      The application for adjudication is to remain ‘alive’ until the question

of substitution is decided.

(e)      The application for adjudication is adjourned to the same date.  It will need to be called again in open Court, once the application for substitution has been determined, at which time leave to withdraw will be granted.

(f)      The proposed application(s) for substitution can be called before any judge, as can the recalled open Court hearing of the application for adjudication, as I have not embarked on a hearing of that application on the merits, and an order granting leave to withdraw can be made by consent once the application for substitution is determined.

(g)The applicants for substitution are to file and serve a synopsis of argument, an indexed and paginated casebook of material pleadings and affidavits, and indexed bundle of authorities, all in accordance with r 7.39, by 9 September 2013.

(h)The judgment debtor is to file and serve his synopsis of argument, and indexed bundle of any further authorities, again in accordance with r

7.39, by 16 September 2013.

(i)The judgment creditor is excused further appearances (its position on the application for adjudication having been recorded). Arrangements are to be made at the conclusion of the hearing of the application for substitution for the application for adjudication to be called in open Court either on that day or as soon as the hearing time is available.

[11]     I record, as it has been discussed today and will be a matter of significance for the  application  for  substitution,  that  Reesby will  be  producing documentary

evidence of the assignment of the debt to it.

Associate Judge Abbott