The Official Assignee v Bassett HC Auckland CIV 2005-404-4380

[2008] NZHC 2502

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2005-404-4380

IN THE MATTER OF     the Insolvency Act 1967

AND IN THE MATTER OF  And in the matter of the estate of

Lawrence Nelson Bassett, a bankrupt

BETWEEN  THE OFFICIAL ASSIGNEE Plaintiff Ex Parte

ANDLAWRENCE NELSON BASSETT First Defendant

ANDWILLIAM HENRY HAWKEN Second Defendant

Appearances: M Tingey for Plaintiff L N Bassett in person W H Hawken in person

Judgment:      13 August 2008 at 4 pm

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 13 August 2008 at 4 pm, Pursuant to Rule 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date……

Solicitors:           Bell Gully, PO Box 4199, Auckland

Armstrong Murray, PO Box 33-1028, Takapuna, Auckland

THE OFFICIAL ASSIGNEE V LAWRENCE NELSON BASSETT AND ANOR HC AK CIV 2005-404-4380

13 August 2008

Decision as to costs

[1]      Lawrence Nelson Bassett, the first defendant was adjudicated bankrupt on 7

August 2002. Pursuant to s 58 of the Insolvency Act 1967 which was then in force, the official assignee on 3 August 2005 filed in this court a notice setting aside the payment of $105,000 made by Lawrence Nelson Bassett to Lawrence Nelson Bassett and William Henry Hawken by depositing $105,000 into a bank account with the National Bank of New Zealand Limited in the name of Dominion Hall Society Trust on or about 30 July 2002. On 23 August 2005, the defendants applied to this court for an order reversing the notice to set aside the disposition. That application finally came on for hearing before me on 14 and 15 April 2008. On 15 April 2008 there was no appearance on behalf of the second defendant. The first defendant obtained leave from me to withdraw his application. On granting leave to withdraw the application I ordered, pursuant to s 58(2)(a), that both defendants pay to the official assignee the sum of $105,000 plus interest thereon at 7.5% per annum from 30 July 2002.

[2]      Following the making of that order, counsel for the official assignee sought an order  for costs on a  full indemnity basis.  I directed  counsel  for  the  official assignee to file a memorandum in support of the application for those costs within fourteen days. There was a direction for the defendants to file a memorandum in reply within a further fourteen days with a direction that counsel for the official assignee would have a further seven days thereafter to file a memorandum in answer.

[3]      Pursuant to those directions, counsel for the official assignee has filed a comprehensive memorandum in support of the application by the official assignee for full indemnity costs. The defendants have not filed any memorandum in answer.

[4]      The application by the official assignee for full indemnity costs is based on rule 48(c)(4) High Court rules. The relevant parts of which provide:

(4)      The Court may order a party to pay indemnity costs if-

(a) The party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b) The party has ignored or disobeyed an order or direction of the Court or breached an undertaking given to the Court or another party to the proceeding; or

(c)  …. (d) .. (e)  ..

(f)  Some other reason exists which justifies the Court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

Counsel for the official assignee further submits that in the circumstances of this case, the threshold of exceptional circumstances to justify and award indemnity costs referred to in Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 has been met.

[5]      The  defendants  attempted  to  justify  the  payment  of  $105,000  into  the National Bank of New Zealand account in the name of Dominion Hall Society Trust on 30 July 2002 which is the disposition which is the subject of the notice as being repayment of an advance made by Dominion Hall Society incorporated as a division of the Royal and Andeluvian Order of Buffalos. The evidence they adduced in support of this claim was most unconvincing. There were differing and conflicting versions as to the circumstances of the advance, there was also clear evidence of tampering with documentary evidence to support the claim. That evidence included writing up check butts after the issue of these proceedings. When I granted leave to withdraw the application, I commented that the application had no chance of success.

[6]      In opposing the application, the official assignee had to go to considerable lengths  in  obtaining  disclosure  of  relevant  documents  from  the  defendants. Discovery by the  defendants  was  a  long  drawn  out  process.  Discovery  was  of considerable assistance in establishing that the defendants claim was completely fictitious.

[7]      Unfortunately, there had to be two separate hearings of this application to set aside  the  notice  issued  by  the  official  assignee.  The  first  hearing  was  before Doogue AJ on 30 October 2006. At the conclusion of the hearing that day, directions

were made for the defendants to provide further submissions both on fact and law by

3 November 2006. At 11.30 am on 3 November 2006, the Judgment of Doogue AJ was delivered dismissing the defendants application. That judgment was delivered before the time had expired for the filing of submissions on behalf of the defendants. On becoming aware of this oversight, Doogue AJ recalled his judgment and awaited the further submissions from the defendants.

[8]      No  further  submissions  were  supplied  by  the  defendants.  Instead,  on

7 November  2006  the  defendants  applied  for  an  order  for  a  rehearing.  That application was opposed by the official assignee. When that application came on for hearing before Williams J on 26 March 2007, it was acknowledged that such application was either misdirected or premature as no order had been made, the Associate Judge’s judgment remaining reserved following the hearing of evidence on

30 October 2006.

[9]      In  the  course  of  his  judgment  Williams  J  suggested  that  the  appropriate course would be for the defendants to apply to Doogue AJ in advance of the delivery of his judgment to recuse himself in the unfortunate situation which had arisen and to direct that the matter be dealt with by another Associate Judge.

[10]     Pursuant  to  that  direction,  an  application  was  made  to  Doogue  AJ  who recused himself and directed that the matter be referred to another Associate Judge. Following that direction the matter came on for hearing before me.

[11]    I certainly have no doubt in concluding that the defendants have acted improperly and unnecessarily in commencing, continuing and proceeding with their application to set aside the official assignee’s notice. By making entries on a check butt, after the proceedings had been issued in an effort to create evidence to support their claims, they have clearly acted improperly and fraudulently.

[12]     I accept that in the vast majority of cases, it would not be appropriate to order a party to pay costs of a further hearing resulting from a situation such as the delivery of a decision before the parties had had an opportunity to file their submissions.  However,  the  evidence  in  this  case  clearly  establishes  that  the

defendants were at all times aware that their application to set aside the official assignee’s notice had no chance of success and would do everything, including altering evidence to try and avoid the inevitable dismissal of that application.

[13]     In this respect it is significant that they did not proceed with the filing of their submissions  as  suggested  by  Doogue  AJ.  Nor  did  they  attempt  to  analyse  his decision to determine whether there was any bias against them. In choosing to apply for  what  in  effect  was  a  further  hearing,  they  deliberately  and  unnecessarily increased the costs incurred by the official assignee.

[14]     Consequently, I am satisfied that but for two matters these circumstances do justify an award of full indemnity costs. The first is that belatedly they decided not to proceed with the application. They are entitled to some credit in deciding not to continue with the proceedings even at a late stage. The second is the lack of detail as to how the solicitor and client costs have been calculated. Counsel for the official assignee seeks costs amounting to $66,245.13 on an indemnity basis based on invoices annexed to his submissions. Most of those invoices when seeking professional service fees refer to services in an accompanying letter. Unfortunately, those letters are not included in the submissions I have received. Whilst I must accept that the costs being claimed were accepted by the official assignee, I still consider that the Court has an overriding responsibility to ensure that the costs being claimed are justified before making an order requiring the defendants to pay those costs.

[15]     I do not consider it appropriate to seek further submissions and information relating  to  the  calculation  of  costs  on  a  solicitor  and  client  basis.  In  the circumstances, I will adopt the proposal of counsel for the official assignee to order costs on a 2B basis with an uplift of 50%. Those costs therefore are as follows:

Commencement   of   defence   to

originating application (2 days x
$1,600.00 plus 50% uplift)

$ 4,800.00

Preparing and filing interlocutory

application
(.6  days  x  $1,600.00  plus  50%
uplift)

$   960.00

Appearance   at   conference   on

5 October 2005

(.3 days x $1,600 plus 50% uplift)

$   720.00

Appearance  at  conference  on  3

May 2006
(.3 days x $1,600 plus 50% uplift)

$   720.00

Appearance at conference on 21

June 2006
(.3 days x $1,600 plus 50% uplift)

$   720.00

Appearance at conference on 21

June 2006

(.3 days x $1,600 plus 50% uplift)

$   720.00

Appearance     at     hearing     of

application on 30 October 2006
(1  day  x  $1,600.00  plus  50%
uplift)

$ 2,400.00

Appearance of junior at hearing of

application on 30 October 2006 (.5 day x $1,600 plus 50% uplift)

$ 1,200.00

Preparation for hearing

(2  days  x  $1,600.00  plus  50%

uplift)

$ 4,800.00

Preparing and filing opposition to

the    defendants’    unsuccessful application for recall

(.6 days x $1,600 plus 50% uplift)

$   960.00

Appearance     at     hearing     of

application for recall

(.25  days  x  $1,600  plus  50%
uplift)

$   600.00

Preparing and filing opposition to

the   defendants’  application   for recusal and rehearing

(.6  days  x  $1,600.00  plus  50%

uplift)

$.. 960.00

Appearance     at     hearing     of

application     for    recusal    and rehearing

(.25  days  x  $1,600  plus  50%
uplift)

$   600.00

Appearance at conference on 28

June 2007

(.3  days  x  $1,600.00  plus  50%
uplift)

$   720.00

Appearance     at     hearing     of

application on 14 April 2008
(2  days  x  $1,600.00  plus  50%
uplift)

$ 2,400.00

Preparation for hearing (based on

2 day fixture)

(4  days  x  $1,600.00  plus  50%
uplift)

$ 4,800.00

Sealing judgment

(.2  days  x  $1,600.00  plus  50%
uplift)

$   480.00

$28,560.00

[16]     Consequently, for the reasons I have given, the defendants are ordered to pay

$28,560 towards the costs of the plaintiff together with the plaintiff’s disbursements and witnesses expenses as fixed by the registrar.

Associate Judge Robinson