Tannenberg Limited v Jellie
[2018] NZHC 1417
•12 June 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-002623 [2018] NZHC 1417
IN THE MATTER of the Insolvency Act 2006 AND IN THE MATTER
of the bankruptcy of CHRISTOPHER WAYNE JELLIE
BETWEEN
TANNENBERG LIMITED
Judgment Creditor
AND
CHRISTOPHER WAYNE JELLIE
Judgment Debtor
Hearing: 12 June 2018 Appearances:
C W Jellie (Judgment Debtor) Applicant for annulment (in person) R B Hucker for Judgment Creditor (Respondent)
C T Jones for Official Assignee
Judgment:
12 June 2018
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on annulment application
This judgment was delivered by me at Auckland on 12 June 2018 pursuant to Rule 11.3 of the High Court Rules
Registrar/Deputy Registrar
TANNENBERG LIMITED v JELLIE [2018] NZHC 1417 [12 June 2018]
Introduction
[1]Christopher Wayne Jellie was adjudicated bankrupt on 21 September 2017.
[2] He now applies for an order that his adjudication be annulled. He says that he should not have been adjudicated bankrupt.
[3] The application for Mr Jellie’s adjudication was made by Tannenberg Ltd (Tannenberg), a judgment creditor. In issuing its bankruptcy notice, Tannenberg had relied on a costs order made by this Court in September 2016. Tannenberg opposes Mr Jellie’s application for annulment.
[4] The Official Assignee has filed his report (and a supplementary report) as required under s 309 of the Insolvency Act 2006 (the Act). On the basis that Tannenberg has opposed the annulment application, the Assignee abides the Court’s decision. He records that none of the requirements for annulment under s 309(1)(b)–
(d) of the Act have been met. In the event the Court were to order annulment under s 309(1)(a) of the Act, the Assignee seeks an order for reasonable remuneration of his services, pursuant to s 309(5) of the Act (now over $5,700 on a time-costed basis).
Annulment on the s 309(1)(a) ground
The statutory jurisdiction
[5]Section 309(1)(a) of the Act relevantly provides:
309 Court may annul adjudication
(1)The court may, on the application of the Assignee or any person interested, annul the adjudication if—
(a)the court considers that the bankrupt should not have been adjudicated bankrupt…
(2)In the case of an application on one of the grounds specified in subsection (1)(a) to (c) by an applicant who is not the Assignee,—
(a)a copy of the application must be served on the Assignee in the manner and within the time that the court directs; and
(b)the Assignee may appear on the hearing of the application as if the Assignee were a party to the proceeding.
(3)The adjudication is annulled—
(a)from the date of adjudication, in the case of an application on the ground specified in subsection (1)(a):
(b)from the date of the court’s order of annulment, in the case of an application on one of the grounds specified in subsection (1)(b) to (d).
(4)In the case of an application for annulment on the ground that the adjudication should not have been made because of a defect in form or procedure, the court may, in addition to annulling the adjudication, exercise its powers under section 418 to correct the defect and order that the application for adjudication be reheard as if no adjudication had been made.
(5)If the court annuls the adjudication on one of the grounds specified in subsection (1)(a) to (c),—
(a)the court may, on the Assignee’s application, fix an amount as reasonable remuneration for the Assignee’s services and order that it be paid, in addition to any costs that may be awarded:
(b)that amount must be paid into a Crown Bank Account:
(c)the Assignee is not entitled to remuneration under section 406 for those services.
Section 309(1) generally
[6] Section 309 provides the only jurisdiction for annulment (or rescission) of an order of adjudication.1
Section 309(1)(a) specifically
[7] I adopt my description of s 309(1) of the Act in Minter Ellison Rudd Watts v Hampton:2
It is settled that the Court should be parsimonious in the exercise of its power to annul. The Court narrowly construes this jurisdiction. The relevant cases are reviewed and the narrow interpretation of s 309(1)(a) is accurately discussed in this regard by the authors of both Heath and Whale on Insolvency3
1 Re Byron (A Debtor), ex parte Commissioner of Inland Revenue [1964] NZLR 508 (SC). See also, Re Guest ex parte BNZ Finance Ltd [1991] 1 NZLR 250 (HC). Both cases dealt with s 119 Insolvency Act 1967, the predecessor to s 309 of the 2006 Act.
2 Minter Ellison Rudd Watts v Hampton [2013] NZHC 2434, at [27] and [34].
3 P Heath and M Whale (eds) Heath and Whale on Insolvency (looseleaf ed, LexisNexis) at 9.26.
and Brookers Insolvency Law & Practice.4 In Re Hunter, Robertson J noted that the cases referred to by the commentators:5
… all relate to the situation where the procedures were wrong, where the notice was bad, abuse of process, and not to the situation of the exercise of the discretion.
…
I am not entitled to interfere with an adjudication by an order of annulment simply because I might have decided matters differently [on the date of the adjudication order].
Chronology
[8]The following events are relevant to this judgment:
10 April 2016 Mr Jellie issued a statutory demand against Tannenberg
6 May 2016 Mr Jellie issued liquidation proceedings against Tannenberg 5 September 2016 The High Court stayed the liquidation proceedings and
ordered Mr Jellie to pay costs and disbursements of $8,773.50
18October 2016 Tannenberg had a bankruptcy notice issued against Mr Jellie for the $8,773.50 High Court costs order
8November 2016 Mr Jellie issued his District Court claim for $26,000 plus interest on which Tannenberg filed a Defence and Counterclaim
7 December 2016 Mr Jellie’s application for an order setting aside the bankruptcy notice was dismissed (on procedural grounds) and Mr Jellie was ordered to pay costs and disbursements of $2,208
14 December 2016 Tannenberg filed an application for Mr Jellie’s adjudication
12May 2017 Mr Jellie’s District Court claim against Tannenberg was struck out in his absence and judgment was entered for Tannenberg on
4 Brookers Insolvency Law & Practice (looseleaf ed, Brookers) at IN309.5(i).
5 Re Hunter ex p Commissioner of Inland Revenue (2000) 19 NZTC 15,722 (HC) at 15,730.
its counterclaim (for $7,507.72) plus costs and disbursements of $7,302.50
26May 2017 Mr Jellie applied for an order setting aside the District Court judgment
29June 2017 The High Court halted the adjudication application (pending outcome of the District Court proceeding) – Mr Jellie was ordered to pay costs of $446
12July 2017 The High Court issued its Minute recording allocation of the District Court fixture on 14 August 2017 and the High Court adjourned the adjudication application to 21 September 2017
23August 2017 Mr Jellie’s setting aside application dismissed by the District Court – Mr Jellie ordered to pay costs and disbursements of
$3,925
19 September 2017 The High Court case officer emailed a reminder to both solicitors of the 21 September 2017 hearing
21 September 2017 Mr Jellie was adjudicated bankrupt (in his absence)
Grounds of application
[9]Mr Jellie’s grounds are set out in eight paragraphs:
1.I had no knowledge of the bankruptcy proceedings or the hearing on 21st September 2017 1 was therefore unable to defend myself.
2.My council (sic), Enterprise Law had told me the bankruptcy proceedings had been placed on hold pending the verdict of a District Court hearing.
3.Enterprise Law did not pass on to me the 29th June 2017 minutes of Associate Judge R M Bell or any of the timetabling.
4.My council (sic), Enterprise Law and specifically lawyer Stephen Potter, has grossly failed in their Duty of Care to a Client. A complaint to the Law Society will be compiled following this application.
5.I have been placed at an unjustifiable disadvantage through the actions of my lawyer.
6.The situation I find myself in is not of my doing.
7.As far as I was aware I had not been given a chance to pay the costs award. I have always maintained that for me to pay the costs award before knowing the outcome of the District Court case places undue financial hardship on me and greatly increases the risk of justice not being done.
8.I request I am allowed time to obtain legal advice from a competent source, an annulment will allow this.
[10] Mr Jellie filed an affidavit in support of the application in which he exhibited correspondence which took place between himself and his solicitors either side of his adjudication.
[11] I will refer to the grounds identified in Mr Jellie’s application as the “unaware of hearing” grounds (paragraphs 1 – 6) and the “lack of opportunity to pay” ground (paragraph 7).
[12] Beyond the grounds identified in the notice of application, Mr Jellie has in his submissions referred to two other matters. I will refer to those as the “lawyer/litigant” ground and the “dishonesty” ground. The latter ground is the subject of a supplementary affidavit filed by Mr Jellie (without leave) shortly before the hearing. It is also discussed in documents submitted to Court by one John Brian Kipping “in support of the judgment debtor”.
[13] Mr Jellie’s supplementary affidavit contains an additional allegation which I will refer to as the “cross-claim” ground.
Ground 1: “unaware of hearing”
[14] Mr Jellie asserts that he was unaware that the adjudication application was to be called (following the District Court setting aside hearing) on 21 September 2017. He has produced correspondence between himself and his solicitors dated from May 2017 to 27 September 2017 (when he first became aware of his adjudication). The correspondence indicates that Mr Jellie was not aware of the hearing which was to take place on 21 September 2017. Mr Jellie assured me in the course of his
submissions that he was also unaware of the judgment delivered by the District Court at the time.
[15] Mr Jellie was nevertheless represented by his solicitor in this proceeding to the point of adjudication. The correct point of notification of hearing dates and other matters was through his solicitor. The documentary evidence establishes that Mr Jellie’s solicitor was correctly notified and even reminded of the hearing date.
[16] The occurrence of the hearing on 21 September 2018, without an appearance on behalf of Mr Jellie, paralleled the situation which had occurred in the District Court on 12 May 2017 when there had also been no appearance for Mr Jellie.
[17] It has parallels also with other failures of appearance recorded by the District Court Judge G M Harrison in relation to a case management conference on 12 May 2017. In relation to that occasion, Mr Jellie is recorded as alleging that it was “due to an administrative oversight on the part of my lawyer” but then, as now, evidence as to any oversight on the part of the lawyer was lacking. The concept of “oversight” is also inconsistent with the 12 July 2017 Minute and the case officer’s 19 September 2017 reminder which were sent to the respective lawyers.
[18] Neither these earlier non-appearances nor that on 21 September 2017 flowed from a wrong procedure, a bad notice or an abuse of process. The Court’s processes had been correctly carried out. Section 309(1)(a) of the Act has no application – the fact that Mr Jellie was unaware of the hearing date or the District Court judgment does not detract from the fact that the adjudication order was obtained with regularity.6
Ground 2: lack of opportunity to pay
[19] Mr Jellie asserts that by the hearing taking place on 21 September 2018, he was denied the opportunity to pay the “costs award”. To this ground he added:
6 Mr Hucker referred to Gilligan Sheppard v Haydock HC Auckland CIV-2009-404-711, 1 December 2009. There, annulment was refused notwithstanding the fact that the debtor, following substituted service, was unaware of the proceeding. The Associate Judge recorded at [9](a) that “nothing has been raised to indicate that Gilligan Sheppard was not entitled to proceed with its application for adjudication or that it acted improperly in obtaining the order”.
I have always maintained that for me to pay the costs award before knowing the outcome of the District Court case places undue financial hardship on me and greatly increases the risk of justice not being done.
[20] In fact, Mr Jellie had a lengthy opportunity to either pay or make forward provision for payment of the District Court judgment debts (and the costs orders made by this Court).
[21] Tannenberg’s pursuit of adjudication at that point was within its rights and the Court did not err in hearing the application on 21 September 2017. Tannenberg remained a creditor.
[22] While this ground of application suggests that Mr Jellie would or might have taken up the opportunity to clear his debts, there is simply no evidence that he would have or could have done so. In the course of his submissions, Mr Jellie focused on a willingness he would have had to source money to clear the debt relied on in the bankruptcy notice. But that debt had become by that time only a modest proportion of his total indebtedness to Tannenberg. He remained at the date of adjudication a significant debtor of Tannenberg, and Tannenberg would have been entitled to obtain an adjudication order even if Mr Jellie had managed to settle the District Court judgment debt.
Ground 3: lawyer-litigant
[23] In the first part of Mr Jellie’s written submissions, he developed the proposition that Tannenberg was not entitled to costs awarded by the Courts by reason of the Court of Appeal’s judgment in Joint Action Funding Ltd v Eichelbaum.7 The argument runs thus:
(a)Tannenberg’s director and sole decision-maker is Gerald Sharrock.
(b)Mr Sharrock is therefore, in terms of Joint Action Funding Ltd v Eichelbaum a lawyer-litigant who is not entitled to a costs order.
7 Joint Action Funding Ltd v Eichelbaum [2015] NZCA 249.
(c)Even if entitled to costs, Tannenberg is limited to such sum as it had actually been billed for and paid.
[24]This argument fails at a number of levels:
(a)Tannenberg, not Mr Sharrock, has been the litigant in all the proceedings.
(b)Tannenberg was independently represented (not by Mr Sharrock) in the proceedings.
(c)The District Court judgment was in part a judgment (on the substantive counterclaim) for $7,507.72, and that remained unpaid at the date of adjudication.
(d)The various costs judgments have all been for scale costs. Mr Hucker has expressly confirmed in the course of his submissions that all his firm’s legal services for Tannenberg have been billed and paid in each instance and have exceeded the scale award.
[25] In the circumstances, I do not grant leave to Mr Jellie to rely on this additional ground of opposition. It is without merit.
Ground 4: dishonesty
[26] Contained in a single paragraph of his written submissions was an allegation by Mr Jellie that Mr Sharrock is a “liar and a thief” and that there will be a miscarriage of justice if there is “not a proper investigation”. Mr Jellie records that there have been “complaints lodged with the New Zealand Law Society”. Details of the complaints were not provided although Mr Jellie advised me in the course of the hearing that he had tried this morning to leave at the Registry a large document which comprises his complaint but that it was rejected by the Registry for lack of form.
[27] Mr Jellie did not identify this ground (of dishonesty) when filing his notice of application. There was a single reference in his supporting affidavit to dishonesty in a paragraph which read:
I stand by all my previous submissions, Tannenberg has stolen my car and the owner, Gerald Sharrock, was my lawyer.
[28] In his supplementary affidavit filed shortly before this hearing, Mr Jellie referred to Mr Sharrock’s affidavit sworn 27 June 2016 in support of Tannenberg’s application to stay Mr Jellie’s liquidation proceeding. It appears that Mr Jellie disputes a statement by Mr Sharrock that he (Mr Sharrock) had not acted as a lawyer for Mr Jellie. He also appears to dispute the accuracy of a ledger exhibited by Mr Sharrock in the stay application. Mr Jellie deposes that these matters resulted in his lodging of complaints of perjury and fraud with the New Zealand Law Society.
[29] Such general allegations of dishonesty as Mr Jellie makes are unsupported by any developed evidence. They are bare assertions as implicitly indicated by Mr Jellie’s observation that they required “a proper investigation”. They were not matters in evidence before the Court when the adjudication order was made. The detail of alleged dishonesty was grossly inadequate when measured against the Court’s well- established requirements where allegations of dishonesty are made.
[30] There was no basis upon which the Court, on the annulment application, could have concluded that the adjudication order should not have been made by reason of an allegation of dishonesty.
[31] In the circumstances, I do not grant leave to Mr Jellie to rely on this additional ground of application.
Ground 5: cross-claim
[32] A fifth ground of application may be identified in Mr Jellie’s second affidavit. It was not expressed as a ground in either the notice of application or in Mr Jellie’s written submissions. I deal with it for completeness. Mr Jellie deposes:
Mr Sharrock (director) of Tannenberg Limited owes me a considerable amount of money which far exceeds the amount Tannenberg Limited is seeking to bankrupt me for.
[33] Mr Jellie attaches a series of invoices marked A1 to A109, each addressed by Mr Jellie to Gerald Sharrock. The invoices referred to by Mr Jellie cannot advance this annulment application. They were not in evidence at the adjudication hearing. Even had they been, and had there been sufficient evidence to indicate that the invoices were arguably payable, they could not have assisted Mr Jellie in opposing adjudication. They were all addressed to Mr Sharrock and not to Tannenberg.
[34] In the circumstances, I do not grant leave to Mr Jellie to rely on this additional ground of application.
Mr Kipping’s documents
[35] Mr Kipping is not a party to this proceeding. He nevertheless submitted for filing two documents which purported to be memoranda in support of a judgment debtor. One of the memoranda had attached to it an affidavit which Mr Kipping apparently filed in proceedings in this Court in which Mr Sharrock is suing Mr Kipping. The documents submitted by Mr Kipping, while taken in at the Registry, have properly not been accepted for filing. Mr Kipping has no status in this proceeding to make submissions (whether or not they purport to have evidence attached to them).
Outcome
[36] Mr Jellie has not established the ground under s 309(1)(a) of the Act for annulment of his adjudication.
[37] Costs must follow the event in favour of the creditor. I have heard from Mr Hucker, Mr Jones and Mr Jellie in relation to costs. Mr Hucker seeks costs on a 2B8 basis. Mr Jellie opposes the awarding of costs, submitting that an award is precluded by Joint Action Funding Ltd v Eichelbaum and that in any event, costs should not exceed what Tannenberg has already been billed. Nothing arises in this case to cut across the primary principle whereby costs should follow the event. It is also
8 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).
appropriate that costs be on a 2B basis as submitted by Mr Hucker. For the Assignee, Mr Jones did not seek the costs of his appearance. The Assignee will be entitled in the context of her charges for estate administration to recover her costs of reporting to the Court and any other incidental attendances.
Orders
[38]I order:
(a)The application of Christopher Wayne Jellie dated 2 October 2017 for an order annulling his adjudication is dismissed.
(b)Christopher Wayne Jellie is to pay to Tannenberg Limited the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar.
(c)There is no order as to the costs of the Official Assignee’s appearance at the hearing.
ADDENDUM
[39] I appreciate that this judgment will further distress Mr Jellie. He understandably views the fact that he was not alerted to the 21 September 2017 hearing, or indeed, the delivery of the District Court judgment as a failure of the system in that his lawyer did not keep him properly informed and failed to represent his interests by attendance at the adjudication hearing. The outcome today is driven by the fact that, in terms of s 309(1)(a) of the Act, this was a case in which the Court would have adjudicated Mr Jellie bankrupt on the date he was adjudicated even had the Court been informed of the matters which Mr Jellie has raised on this application.
Associate Judge Osborne
Solicitors:
Hucker Associates, Auckland Copy to: C W Jellie, Auckland C T Jones, Official Assignee
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