TREVOR KINRED QUIRK as executor of the Estate of PETER EDWARD CULMER READ Judgment Creditor AND RICHARD WILLIAM DOWNEY Judgment Debtor
[2024] NZHC 3401
•18 November 2024
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2024-412-030
[2024] NZHC 3401
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of RICHARD WILLIAM DOWNEY as trustee of St John’s Trust
BETWEEN
TREVOR KINRED QUIRK as executor of the Estate of PETER EDWARD CULMER READ
Judgment Creditor
AND
RICHARD WILLIAM DOWNEY
Judgment Debtor
Hearing: 31 October 2024 Appearances:
H D P van Schreven for Judgment Creditor Mr Downey appears in person
Mr E Lee for supporting creditors
Judgment:
18 November 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 18 November 2024 at 10.00 am pursuant to rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
QUIRK v DOWNEY [2024] NZHC 3401 [18 November 2024]
[1] This is a creditors application by Mr Quirk for an order adjudicating the judgment debtor, Mr Downey, bankrupt. The creditors application is founded on a costs judgment that Mr Quirk obtained in another proceeding brought against him by Mr Downey.1 That proceeding (the 737 proceeding) was subsequently struck out as a result of Mr Downey’s failure to comply with an unless order but features heavily in the issues that arise on this application.
[2] Mr Downey opposes the creditors application. He argues it is just and equitable the Court not make an adjudication order, and that there are other grounds why an adjudication order should not be made. Mr Downey also argues the creditors application should be adjourned so an application he has made for legal aid to challenge Mr Quirk’s costs judgment, the making of the unless order in the 737 proceeding and the striking out of that proceeding can be determined.
Procedural background
[3] Mr Quirk is the executor of the estate of Peter Edward Culmer Read. Since 2018 these parties have been engaged in the 737 proceeding brought by Mr Downey relating to Mr Read’s estate. Mr Downey considers he is entitled to payment from the estate of large sums for services he says he provided to Mr Read during his lifetime.
There have also been other related proceedings between the same parties.2
[4] What should have been a relatively straightforward claim developed into a procedural quagmire, mainly in respect to discovery. It was also subject to many delays and the trial was adjourned on three occasions. The reasons for the delays are set out in a judgment of 18 March 2024, in which I adjourned the trial for a third time and made an unless order against Mr Downey.3 The unless order was subsequently varied on terms beneficial to Mr Downey, and relevantly included:4
1 Downey v Quirk CIV-2018-409-737 [the 737 proceeding].
2 Quirk v Downey HC Christchurch CIV-2019-409-284.
3 Downey v Quirk [2024] NZHC 578 at [64] [the 18 March 2024 judgment].
4 Downey v Quirk HC Christchurch CIV-2018-409-737, 11 April 2024, Associate Judge Paulsen (Minute).
[8] …
(c) Mr Downey’s briefs of evidence and nominations for the draft chronology and index of documents for the common bundle shall be exchanged by 21 June 2024;
…
(i)If Mr Downey fails to comply with any of the directions above for the exchange of his evidence for a period of more than five working days then his third amended statement of claim shall be struck out and judgment entered for Mr Quirk.
[9]If Mr Downey is in any doubt as to the nature of an unless order or its effect, I would invite him to consider the Court of Appeal’s decision in SM v LFDB [2014] NZCA 326, [2014] 3 NZLR 494 particularly at [31].
[5] In the 18 March 2024 judgment I also made a costs award in favour of Mr Quirk. Those costs were fixed in an amount of $12,220. The order was sealed on 21 March 2024.
[6] On 22 March 2024 Mr Quirk applied for the issue of a bankruptcy notice against Mr Downey in respect of the costs judgment. The bankruptcy notice was issued that day.
[7] On 3 April 2024 Mr Quirk applied for substituted service of the bankruptcy notice. On 12 April 2024 I made an order that substituted service of the bankruptcy notice be effected by way of email to Mr Downey.5
[8] The bankruptcy notice was deemed to have been served upon Mr Downey in accordance with the order for substituted service on 15 April 2024. Mr Downey had until 30 April 2024 to apply to set the bankruptcy notice aside.6
[9] On 30 April 2024 at 11.59 pm Mr Downey purported to file and serve by email an application to set aside the bankruptcy notice. The application was not in proper form and was not accepted by the Registry. It was also filed out of time in any event.7
5 Quirk v Downey [2024] NZHC 791.
6 Insolvency Act 2006, s 17: a debtor commits an act of bankruptcy where he or she fails to comply with the requirements of a bankruptcy notice within 10 working days of the date of service of the notice. Here the bankruptcy notice was served on Mr Downey on 15 April 2024 and, making allowance for ANZAC Day, the 10th working day after service was 30 April 2024.
7 The reasons the application was filed out of time are explained at [27].
There has been a history of Mr Downey filing and serving documents outside Registry hours on the very last day they were due,8 or very shortly prior to court events.
[10] On 1 May 2024 Mr Quirk filed the creditors application. On 3 May 2024 Mr Quirk was granted an order for substituted service of the creditors application and accompanying documents.9 The creditors application was given a hearing date of 20 June 2024.
[11] On 17 June 2024 notices of appearance in support of the creditors application were filed by QBE Insurance (Australia) Ltd for $11,868.80 (including disbursements) and Layburn Hodgins Ltd for $10,611.60 (plus disbursements). Both amounts were costs awards made against Mr Downey in respect to an unsuccessful application he had made in the 737 proceeding to join additional defendants.10
[12] On 19 June 2024 Mr Downey filed a memorandum requesting an adjournment of the hearing of the creditors application. Mr Downey said he needed time to mentally be able to represent himself without prejudicing his existing litigation commitments (a reference to the 737 proceeding), and that he intended to pursue a private prosecution against Mr Quirk and apply for leave to appeal the 18 March 2024 judgment.
[13] The creditors application came before the Court on 20 June 2024. Mr Downey did not appear. He had not filed a notice to oppose the creditors application. Associate Judge Lester recorded in his minute of the hearing that, notwithstanding the absence of any opposition to the creditors application, he was conflicted and he adjourned the creditors application to 22 July 2024. Associate Judge Lester also addressed a further application Mr Downey had filed to set aside the bankruptcy notice. He regarded the application a nullity and gave his reasons.11
8 See for instance Downey v Quirk HC Christchurch CIV 2018-409-737, 27 June 2023, Dunningham J (Minute); and Downey v Quirk HC Christchurch CIV 2018-409-737, 3 July 2024, Preston J (Minute).
9 Quirk v Downey [2024] NZHC 1075.
10 Downey v Quirk [2023] NZHC 2810.
11 Downey v Quirk HC Christchurch CIV-2024-412-030, 20 June 2024, Associate Judge Lester (Minute).
[14] On 22 July 2024 the creditors application came before Eaton J. Again there was no appearance by Mr Downey, who filed a memorandum shortly before the hearing explaining that he was unable to attend. Mr Downey expressed his intention to pursue matters by way of appeals and a private prosecution, and also that he intended to seek legal aid. Eaton J noted that Mr Downey had not taken any steps since the last hearing but granted a further adjournment to 22 August 2024. However,
Eaton J recorded in his minute:12
[10] Mr Downey should not consider the granting of his application to adjourn the judgment creditor’s application as any indication of merit in the various measures that he has proposed taking. The adjournment is granted to enable Mr Downey to have an opportunity to be heard. If he fails to appear on 22 August, it is inevitable that the application for adjudication will be granted.
[15] As noted above, pursuant to the 18 March 2024 judgment (as varied) Mr Downey was to exchange his briefs and other documents in the 737 proceeding by 21 June 2024. The unless order would take effect if he failed to comply with that direction for more than five working days (that is by 1 July 2024). Mr Downey had not exchanged his briefs of evidence or any documents by 5.00 pm on 1 July 2024. Mr Quirk’s lawyers sent a memorandum to the Court and Mr Downey requesting that Mr Downey’s claim be struck out with costs at 5.07 pm on 1 July 2024.13 At
11.57 pm, Mr Downey sent documents to the Registry and Mr Quirk’s lawyers by email, which he contends was compliance with the unless order.
[16] On 3 July 2024 Preston J issued a minute noting the protracted history of the 737 proceeding and the events of 1 July 2024.14 She stated she was satisfied that Mr Downey had not complied with the unless order, as pursuant to r 6.6(3) of the High Court Rules 2016 (the Rules) the documents Mr Downey had transmitted to the Registry and Mr Quirk’s lawyers must be treated as having been served on 2 July 2024. Preston J directed that Mr Downey’s third amended statement of claim was struck out and judgment was entered for Mr Quirk with costs to be fixed.
12 Downey v Quirk HC Christchurch CIV-2024-412-030, 22 July 2024, Eaton J (Minute).
13 Strictly the request was unnecessary as an unless order takes immediate effect: SM v LFDB [2014] NZCA 326, [2014] 3 NZLR 491 at [31(c)].
14 Downey v Quirk HC Christchurch CIV-2018-409-737, 3 July 2024, Preston J (Minute).
[17] On 31 July 2024 Mr Downey filed what purported to be a notice of appeal from “the decisions” in Preston J’s minute. It is in the nature of a memorandum, requesting Preston J’s minute be rescinded or that leave be granted to take the matter to the Court of Appeal.
[18] On 22 August 2024 the creditors application again came before the Court. On this occasion Mr Downey made an appearance in person and applied for a further adjournment. He stated he had applied for legal aid and identified a lawyer who was prepared to act for him if legal aid was granted. I adjourned the creditors application to 19 September 2024, noting that if Mr Downey intended to oppose the creditors application he would need to file formal documents to do so. In addition, I arranged a telephone conference for 12 September 2024 to confirm progress of Mr Downey’s application for legal aid and to address any issues that needed to be attended to prior to the next hearing.
[19] The telephone conference on 12 September 2024 was attended by a lawyer who had expressed a willingness to act for Mr Downey if legal aid was granted, Mr Michalik. He did so as a courtesy to the Court only. Mr Downey updated the Court on the status of his legal aid application. Legal aid had not been granted, but an application had been filed and a request made by the Legal Services Commissioner for further information. I again advised Mr Downey that he would need to file a formal opposition to the creditors application if he wished to resist an order for adjudication being made at the next hearing on 19 September 2024.
[20] On 17 September 2024 Mr Downey filed his opposition to the creditors application. Broadly, the grounds of opposition were that:
(a)the 18 March 2024 judgment was wrong and Mr Downey intended to seek leave to appeal the decision;
(b)Mr Downey had cross-claims against Mr Quirk that exceeded the amount of the costs award the subject of the creditors application; and
(c)Mr Downey had applied for legal aid, including in relation to an appeal of the 18 March 2024 judgment, and it would be contrary to the interests of justice for the creditors application to proceed prior to him having an opportunity to present his case.
[21] The hearing of the creditors application on 19 September 2024 could not proceed as Associate Judge Lester was scheduled to sit in the bankruptcy list that day. As he had previously disclosed, he was conflicted and he issued a minute timetabling the creditors application to hearing on 10 October 2024.
[22] On 30 September 2024 costs and disbursements were fixed in favour of Mr Quirk and against Mr Downey in the 737 proceeding in the amount of $111,493.50 for costs and $78,734.86 for disbursements.
[23] On the evening of 9 October 2024 Mr Downey emailed the Court with a memorandum and doctor’s certificate, indicating that he was unwell and seeking a two-week adjournment of the hearing of the creditors application scheduled for the next day. In a minute issued on 10 October 2024 I granted the adjournment to 31 October 2024, noting “[t]hat is a three-week adjournment. Mr Downey should understand that it is unlikely any further adjournment will be granted.”
[24] The creditors application came on for hearing on 31 October 2024. Mr Downey appeared at the hearing and presented detailed submissions in opposition to the application.
The creditors application
[25] Section 13 of the Insolvency Act 2006 provides for the circumstances when a creditor may apply for a debtor’s adjudication. Those circumstances are as follows:
When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[26] These requirements are satisfied in this case. Mr Downey owes Mr Quirk an amount for costs awarded in the 18 March 2024 judgment, which sum is both an amount certain and immediately payable.15 He also owes Mr Quirk a much larger sum for costs awarded on the striking out of the 737 proceeding on 30 September 2024. I am also satisfied Mr Downey committed an act of bankruptcy within three months of the filing of the creditors application by failing to satisfy the bankruptcy notice served upon him on 15 April 2024.
[27] Mr Downey has argued it was wrong for the Registry to have refused to accept his application to set aside the bankruptcy notice that he forwarded to the Registry by email on 30 April 2024 at 11.59 pm. However, that overlooks that an application to set aside a bankruptcy notice must be filed and served within 10 working days of service of the bankruptcy notice. That requirement is strict and the Court has no power to extend time. An application filed out of time is a nullity and late service of an application cannot cure an act of bankruptcy that has already occurred.16 Mr Downey was required to file and serve his application to set aside the bankruptcy notice by 30 April 2024. As he sent his application electronically outside Registry hours on that day, it was not filed until 9.00 am the following day and was out of time.17 It was also not served on Mr Quirk’s lawyers until 1 May 2024 for the same reason.18
[28] Notwithstanding that the grounds for making an order for adjudication are satisfied, there are circumstances in which the Court may refuse to make such an order. For present purposes the relevant provision is s 37 of the Insolvency Act, which provides as follows:
15 Downey v Quirk, above n 3.
16 Re Memelink, ex parte SANCO (NZ) Ltd HC Wellington CIV-2008-485-2691, 10 March 2009; and McCormack v Stills [2024] NZHC 1395.
17 High Court Rules 2016, r 5.1B.
18 Rule 6.6(3).
37 Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a)the applicant creditor has not established the requirements set out in section 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[29]Mr Downey relies on ss 37(c) and (d).
[30] Guidance as to the approach the Court should take when hearing a creditors application can be found in Baker v Westpac Banking Corporation, which although decided under former legislation is still applicable:19
The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Ltd and McHardy v Wilkins & Davies Marinas Ltd (in receivership). It is proper for the court to consider not only the interests of those directly concerned — the petitioner, other creditors, the debtor — but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the Court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[31] In Re Tootell, ex parte Rabobank Australia Ltd, Associate Judge Osborne accepted the following principles applied in relation to an adjudication application:20
·The creditor has the onus of establishing the allegations in its application;
·The Court may in its discretion refuse to adjudicate a debtor bankrupt (notwithstanding the jurisdiction is established) if it is just and
19 Baker v Westpac Banking Corporation CA212/92, 13 July 1993 at 4, cited in Re Commissioner of Inland Revenue, ex parte Brown [2016] NZHC 1232 at [14].
20 Re Tootell, ex parte Rabobank Australia Ltd [2013] NZHC 2975 at [6].
equitable not to make an order or there is any other sufficient reason not to make an order ...;
·The debtor has the onus of satisfying the Court that either it is just and equitable or that some other sufficient reason exists for the Court’s not making an order of adjudication; and
·The Court is not to refuse an order of adjudication on the grounds of expediency or convenience.
[32] Associate Judge Osborne also referred to the decision of Master Williams QC in Re Epirosa, ex parte Diners Club (NZ) Ltd, where the factors considered relevant to the exercise by the Court of its discretion included:21
(a)What are the wishes of all affected parties, including the applying creditor, other creditors and the debtor?
(b)Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?
(c)What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?
(d)Will adjudication be pointless?
(e)Will the debtor, if adjudicated, be rendered unable to support himself or herself?
(f)Does the debtor have such a standing in the community that significant issues of stigma or embarrassment will result?
Analysis
[33] Mr Downey argues it would be unjust to adjudicate him bankrupt because he has cross-claims against Mr Quirk which exceeds the amount of the judgment debt
21 Re Epirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992.
upon which the creditors application is based. Mr Downey’s cross-claims consist of the same claims he pursued in the 737 proceeding and also costs in that proceeding.
[34] The difficulty with this submission is that Mr Downey’s 737 proceeding has been struck out and costs of the proceeding have been awarded to Mr Quirk. In response, Mr Downey says he intends to appeal both the 18 March 2024 judgment making the unless order and also the striking out of his claim and entry of judgment against him as he says he complied with the unless order. He describes the request made to the Court by Mr Quirk’s lawyer that judgment be entered against him for non-compliance with the unless order as a “despicable act”.
[35] To the extent that Mr Downey intends to challenge the making of the unless order and the subsequent striking out of his claim, I consider he has little prospect of success. Further, contrary to what appears to be Mr Downey’s understanding, he did not comply with the terms of the unless order. The documents he sent to Mr Quirk’s lawyers and the Registry at 11.59 pm on 30 April 2024 were not filed or served on that day but on 1 May 2024 due to the effect of rr 5.1B and 6.6(3) of the Rules.22 Further still, the documents did not comply with the requirements of the unless order. They were clearly a hasty attempt to file and serve something in response to the memorandum of Mr Quirk’s lawyers seeking judgment. Amongst the documents is what purports to be a brief of evidence but is really submissions. There is no chronology.
[36] Mr Downey made lengthy submissions to the effect that it would be unjust to bankrupt him when Mr Quirk and his lawyers have abused court processes in the manner in which they have conducted litigation with him, leading to a breakdown in his health and causing him to be unable to conduct the 737 proceeding. This is an issue I addressed in the 18 March 2024 judgment before making the unless order. Notwithstanding all that Mr Downey says about the matter, and having full regard to what I accept were and continue to be his serious health issues, matters had reached a point where I considered I had no option but to make the unless order. Subsequent events have simply confirmed that was the case.
22 Mr Downey says by the terms of the unless order he was not required to file the documents, but as noted they were neither filed nor served on 30 April 2024.
[37] Mr Downey says the making of an order adjudicating him bankrupt would serve no purpose as he has nothing, having spent large amounts pursuing the 737 proceeding and also borrowing money for that purpose. I cannot be satisfied that the making of an adjudication order would not serve any purpose. Mr Downey has not put before the Court a statement of his assets and liabilities, nor has he disclosed the financial position of any trusts in which he has an interest, including the St John’s Trust of which he is a trustee. I cannot dismiss the possibility that his creditors might benefit from an investigation into his affairs by the Official Assignee.
[38] The amount owing to Mr Quirk under the costs judgment upon which the creditors application is based is modest, but Mr Downey presently also owes Mr Quirk a much larger sum for costs. The beneficiaries of the estate of Mr Read are entitled to expect payment to offset what are no doubt very large costs incurred in defending the 737 proceeding. I also understand the administration of Mr Read’s estate has been held up for years due to this litigation. The delays are unacceptable and, as will be clear from the 18 March 2024 judgment, I consider Mr Downey is primarily responsible for those delays.
[39] The wishes of creditors who have filed appearances in support are also to be considered. I can see no possible basis upon which Mr Downey can challenge their entitlement to payment, and if I was to dismiss Mr Quirk’s creditors application it is difficult to see how an application by those creditors to adjudicate Mr Downey bankrupt could be resisted.
[40] The final matter raised concerns Mr Downey’s application for legal aid. Mr Downey has produced correspondence from the Legal Services Commission which confirms that his application for legal aid remains under consideration. He says I should not make an order adjudicating him bankrupt at least until that application is determined. He says if he is adjudicated bankrupt there is a real risk the Official Assignee will not pursue the 737 proceeding.
[41] I am not prepared to adjourn the creditors application until there is a decision on Mr Downey’s application for legal aid. Bankruptcy proceedings should be dealt with promptly. The bankruptcy notice was issued in March 2024 and the creditors
application filed on 1 May 2024. Mr Downey has had almost eight months in which to obtain legal aid. For several months he did not apply for legal aid, and obtained an adjournment of the creditors application on the basis he needed time to represent himself. He has obtained further adjournments while his application for legal aid has been processed. There is no indication of when a decision might be made on the application. Also, unfortunately this proceeding has become a simulacrum of the 737 proceeding, characterised by Mr Downey failing to file documents, filing documents late, making numerous requests for adjournments, filing discursive memoranda and raising historical grievances that have no direct bearing on the issues before the Court. This all comes at a significant cost to the beneficiaries of the estate of Mr Read. It is also contrary to the public interest in the efficient administration of justice and responsible use of the Court’s resources.
A final matter
[42] Following the hearing on 31 October 2024 Mr Downey filed a memorandum of further submissions attaching numerous documents he wanted me to consider. He also included a request for a copy of or access to “the audio recordings of the latest hearing, all prior hearings, and all telephone conferences in respect of CIV-2024-412- 30, CIV-2018-409-737, and CIV-2019-409-284”. He stated these requests were made so he could ascertain that his pursuit or defence of those proceedings had not been unjustly affected by “side-effects of his medication or for any other reason”.
[43] The proceedings Mr Downey refers to go back over six years. I do not know how many hearings and telephone conferences have occurred in the course of those proceedings, but it is a large number. The time and costs that would be incurred searching for and providing transcripts of each and every hearing where that is available would be substantial. What is more, there is no live issue before the Court that would require that to be done. The application is refused.
Result
[44]I order:
(a)Mr Quirk’s creditors application is granted and Mr Downey is adjudicated bankrupt.
(b)Mr Downey shall pay the costs of Mr Quirk and the supporting creditors on a 2B basis together with disbursements to be fixed by the Registrar.
(c)This order is timed at 10.00 am today.
O G Paulsen Associate Judge
Solicitors:
Clark Boyce, Christchurch
Layburn Hodgins, Christchurch
Copy to:
Mr Downey
Official Assignee
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