Waimauri Limited v Mahon
[2021] NZHC 1538
•25 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1218
[2021] NZHC 1538
IN THE MATTER of the Insolvency Act 2006 IN THE MATTER
of the proposed bankruptcy of NEVILLE CHRISTOPHER MAHON
BETWEEN
WAIMAURI LIMITED
Judgment Creditor
AND
NEVILLE CHRISTOPHER MAHON
Judgment Debtor
Hearing: 8 March 2020 Appearances:
M Lenihan for the Judgment Creditor
RB Hucker and RS Selby for the Judgment Debtor
Judgment:
25 June 2021
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 25 June 2021 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel M Lenihan, Auckland
Hucker & Associates, Auckland
WAIMAURI LIMITED v MAHON [2021] NZHC 1538 [25 June 2021]
Introduction
[1] Mr Mahon, the judgment debtor, applies for a halt of bankruptcy proceedings brought against him by Waimauri Ltd.
[2]The bankruptcy proceedings follow the failure by Mr Mahon to pay Waimauri
$394,245.74 plus interest of $437,639.42, as ordered by Muir J on 29 May 2020.1
[3] Mr Mahon has appealed the High Court decision, with the appeal due to be heard by the Court of Appeal in September 2021.
[4] No stay has been sought preventing enforcement of the High Court decision until the appeal is determined.
[5] Waimauri issued a bankruptcy notice on 2 September 2020 seeking payment of the total amount ordered of $831,885.16 (“Judgment Debt”). The bankruptcy notice was not complied with leading to these bankruptcy proceedings being commenced.
[6] Waimauri opposes Mr Mahon’s application for a halt on the basis that Waimauri has obtained judgment, no stay has been sought from the Court of Appeal, and so Waimauri is entitled to its money. In Waimauri’s submission, Mr Mahon has failed to disclose any meaningful information about his financial position, despite a number of requests, and so should not be entitled to a halt. Waimauri submits further that if a halt is granted it should only be on the basis that security is provided.
Issues
[7]The issues for this Court are:
(a) Should the bankruptcy proceedings be halted pending determination of the appeal?
(b) If so, should the halt be subject to security being provided for the Judgment Debt?
1 Waimauri v Mahon [2020] NZHC 1170 [High Court Decision].
[8] I set out a brief summary of the background facts to provide context before first determining the security question, which is of relevance to the proposed halt and can be answered relatively easily. I then move to consider whether a halt should be ordered.
Relevant background
[9] The Judgment Debt arises following the bringing of a claim by Waimauri and Mr Edney against Beach Arena Ltd and Mr Mahon for breaches of lease and loan agreements relating to the development of the Station Hotel in Auckland and adjacent properties. Before the claim was brought, Mr Mahon, Mr Edney and their respective interests had been engaged in business ventures together for several decades.
[10] Mr Mahon and Beach Arena disputed that any monies were owed in relation to the Station Hotel development and counterclaimed, pleading that Mr Edney and Waimauri:
(a)had breached a collateral “clean slate” agreement varying the terms of the lease and loan agreements; and
(b)that Mr Edney and Waimauri’s conduct was so egregious that they should be estopped from recovering damages.
[11] Muir J held that the only amount payable was the amount outstanding under the loan agreement of $394,245.74 plus interest, a sum reduced significantly from that originally sought by Waimauri.2 Mr Mahon was the guarantor of the loan and so was found liable. The counterclaim was dismissed.
[12] Beach Arena and Mr Mahon have appealed to the Court of Appeal. The grounds of appeal allege that Muir J erred when dismissing the “clean slate” defence and the counterclaim advanced by Mr Mahon and Beach Arena.
2 High Court Decision, above n 1, at [178]-[198].
Issue (1): Should any order for halt be subject to a condition that security be provided?
[13] It appears from the evidence filed by Mr Mahon that there is no definite date by which security will be able to be provided. Mr Mahon refers in his evidence to the possibility of security being provided at some future date “from a debt that is due to [him] from a joint venture forestry operation that is well known to Mr Edney”. Mr Mahon says further that “there are monies due to [him] in terms of loans as well as an equity interest in the forestry operation” and that he has “requested that the funds be repaid to enable the securing of the judgment” pending appeal. But there are no clear timeframes set out as to when there may be money or assets available to provide security.
[14] From the evidence it, therefore, appears unlikely that Mr Mahon would be able to comply with any condition that security be provided in a timely way. I proceed, therefore, on the basis that security is not able to be provided.
Issue (2): Should the bankruptcy proceedings be halted?
[15] The judgment debtor applies for a halt on the basis of ss 42(2) and 38 of the Insolvency Act 2006. Section 42(2) provides the Court with a specific power to halt where the judgment debt on which the bankruptcy proceedings are based is subject to an appeal. Section 38 provides a general power to halt the proceedings and does not require an appeal.
[16] Mr Mahon additionally sought to rely on s 43 but that section only applies when the underlying debt is yet to be determined. The High Court has determined the debt in this case, so s 43 does not apply.
[17] Mr Mahon relies on s 38 in addition to section 42(2) because Mr Mahon and his interests are engaged in further proceedings with Mr Edney and his interests. Mr Mahon says that bankruptcy at this stage would prevent him pursuing or defending those proceedings as well as the appeal in respect of the Judgment Debt.
Legal principles in relation to ss 38 and 42
[18] Section 38 of the Insolvency Act provides the Court with an unfettered power at any time to halt a creditor’s application for adjudication on any terms and conditions the Court thinks appropriate.
[19] The cases considering s 38 emphasise that the final decision should balance all of the relevant factors to achieve a just outcome. In Bank of New Zealand v Koroniadis3 it was held that the lack of any particular matters the Court must take into account makes it clear that Parliament intended the discretion to be flexible, allowing the courts to respond to varying circumstances by affording differing weight according to each case.
[20] Section 42 provides a more specific power where the judgment relied on in the bankruptcy notice is under appeal. It provides at s 42(2):
42 Halt or refusal of application when judgment under appeal
…
(2)If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money,as the case may be, and the appeal is still to be decided, then the court may—
(a)halt the creditor’s application for adjudication; or
(b)refuse the application.
[21] The Court’s discretion to grant a halt under s 42 is, as for section 38, not fettered by the prescription of express factors or the weight to be accorded to them. In Yeoh v Al Saffaf,4 this Court held that the following factors were relevant:
(a)the bona fides of the debtor in prosecuting the appeal (with the merits of the appeal not generally considered unless the appeal has absolutely no prospect of success);
3 Bank of New Zealand v Koroniadis [2013] NZHC 2865.
4 Yeoh v Al Saffaf HC Auckland CIV-2006-404-1164, 21 June 2006.
(b)the stage the appeal has reached and whether there has been a delay in prosecuting the appeal;
(c)whether the halt of the proceeding would unduly harm the creditors; and
(d)whether the bankruptcy proceedings might render the appeal nugatory.
[22] In Re Pillay ex parte ANZ National Bank Ltd, Associate Judge Faire adopted the above factors, noted that the power to halt under s 42 involves a discretion similar to the power to give interim relief pending an appeal under the Court of Appeal (Civil)
Rules,5 and noted other relevant factors including:6
(a)the effect on third parties;
(b)the novelty and importance of the question on appeal;
(c)the public interest in the proceeding; and
(d)the overall balance of convenience.7
[23] The parties accepted that the factors set out above are the factors to be taken into account in a halt application, although counsel for Waimauri submitted that not all of the factors in Pillay are relevant to this application.
[24] I discuss halting the proceedings under s 42 first because it applies specifically where there is an appeal in respect of the underlying debt, as there is here.
5 Court of Appeal (Civil) Rules 2005, r 12.
6 Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV-2009-404-4175, 3 December 2009 at [11].
7 See the observations of Lang J in Re Wright ex parte Health Distributors Ltd HC Hamilton CIV- 2010-419-121, 5 November 2010 at [13] where “context is everything”.
Consideration of factors relevant to a halt under section 42
Factors (a) and (b): the bona fides of the debtor in prosecuting the appeal, the stage the appeal has reached and whether there has been a delay in prosecuting the appeal
[25] The first two factors referred to in Yeoh v Al Saffaf relate to the bona fides of the debtor in prosecuting the appeal and the timing.
[26] The appeal has been set down for hearing in September 2021 and security for costs of $7,650 has been paid.
[27] As referred to above, an extension of time was granted for the filing of the case on appeal following an application for an extension by Mr Mahon a day before the case on appeal was required to be filed. Mr Mahon also failed to apply for the allocation of a fixture by the required date.
[28] Waimauri opposed extensions of time being granted both for the filing of the case on appeal and for the allocation of a fixture.
[29] Mr Mahon explained the delay in filing the case on appeal as relating to Covid- 19, both from administrative and financial perspectives, as well as other commitments of the litigation support person engaged. The Court of Appeal granted both extensions, holding that the reasons for the delay, “although containing some questionable assertions”, provided an explanation which “when viewed holistically, is reasonable”.8
[30] Counsel for Mr Mahon submitted that the opposition by Waimauri to the extensions of time in fact slowed the allocation of a hearing date and so any delay in prosecuting the appeal was brought about by Waimauri, rather than Mr Mahon. If Mr Mahon had filed his case on appeal and applied for the allocation of a hearing date on time in the first place, however, opposition would not have been necessary.
[31] There is now a date allocated for the hearing of the appeal in September 2021, which is within a relatively short time period. The earlier failure to diligently prosecute the appeal is not sufficient for me to reject the application for a halt outright.
8 Mahon v Waimauri Ltd [2020] NZCA 580 at [23].
I still include the earlier delay, however, as a factor for consideration in the exercise of my discretion.
[32] The merits of an appeal are only relevant to an application to halt adjudication proceedings where an appeal has absolutely no prospect of success.9
[33] The Court of Appeal considered the merits of the appeal in its decision on whether to grant extensions of time. It held that it could only dismiss the applications on the grounds of the merits of the appeal if the appeal was “clearly hopeless”, relying on Almond v Read.10 Whilst appreciating “the force in Mr Chisholm QC’s submissions concerning the merits”, the Court did not think the appeal could properly be described as “clearly hopeless”.
[34] So, although counsel for both Mr Mahon and Waimauri spent some time discussing the merits of the appeal, it is unnecessary for me to weigh the merits in my consideration as the Court of Appeal has already found that the appeal cannot be described as “clearly hopeless”.
Factor (c): whether the halt of the proceeding would unduly harm creditors
[35] Counsel for Mr Mahon submitted that a halt would not unduly harm creditors because the creditor, Waimauri, has not opposed the halt application on the grounds of prejudice and no evidence of prejudice or hardship has been provided by Waimauri.
[36] Furthermore, Mr Mahon has given evidence that he has no other creditors other than creditors in respect of legal fees incurred in the prosecution of the appeal and this proceeding (which at the time of the hearing totalled less than $20,000) and a disputed debt with a government department of approximately $36,000 that Mr Mahon is engaged in discussions over.
[37] Counsel for Waimauri’s response is that Waimauri is prejudiced because it is being kept from its money: having obtained a valid judgment Waimauri should be able to enforce it unless a stay application has successfully been brought.
9 Yeoh v Al Saffaf, above n 4, at [15]-[16].
10 Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801 at [39].
[38] But an application for halt does not depend on an application for a stay of enforcement having been made and declined. The test for a stay of enforcement is at an earlier stage and has different considerations. Not having applied for a stay does not prevent Mr Mahon from applying for a halt. In fact it is to the advantage of the judgment creditor for a stay of enforcement not to be ordered because service of bankruptcy proceedings starts time running in respect of irregular transactions.11 If a stay were granted, bankruptcy proceedings would not be able to be commenced.
[39] The circumstances of this case are unusual as, although the High Court has found that Beach Arena and Mr Mahon owe money pursuant to the loan agreement, Mr Edney still appears to have profited from the development significantly. Muir J concluded on the estoppel claim:
[125] This is one of those rare cases where there is an apparent disjunction between what is seemingly a fair outcome and the result arrived at by application of principle to the established facts and the terms of the pleaded case. It will be unsurprising in light of some of my earlier comments that I regard Mr Edney’s attempted recovery under the loan agreement as rapacious in the context of:
(a)The uplift achieved by him over the option price.
(b)Nondisclosure of the insurance premium increase.
(c)The necessity that [Beach Arena] undertake substantial and unexpected maintenance works to mitigate an imminent threat to public safety, and without support from Mr Edney, except on terms that he loan the money.
(d)Extensive efforts on the part of Mr Lu to stabilise both the business and the maintenance position, all at no remuneration.
(e)The substantial capital expenditure undertaken by [Beach Arena] with respect to establishment of the backpackers’ accommodation, in so doing enhancing the value of Waikoro’s asset.
(f)Mr Mahon’s efforts (and [Beach Arena’s] associated expenditure of $132,619) in obtaining Resource Consent for the development lots (including seismic investigations), again enhancing the value of Waikoro’s asset.
11 Insolvency Act 2006, s 193.
(g)Work undertaken by [Beach Arena] to refresh accommodations and bathrooms in accordance with specifications developed by Ms Loo, a registered architect, with the same result.
(h)[Beach Arena’s] active co-operation in the sales process, at least until mid-2016.
[126] Reluctantly, however, I have come to the conclusion that [Beach Arena]/Mr Mahon’s endeavours to shoehorn the resulting equities into an estoppel framework must fail. Mr Mahon had reasonable expectations as to how Mr Edney would operate but they were based on normative standards of fair play, not on any specific representations which [Beach Arena] is either able to establish on the evidence, on which it reasonably and detrimentally relied, or which align with the pleaded case. In that sense he misjudged Mr Edney.
(footnotes omitted)
Factor (d): whether the bankruptcy proceedings might render the appeal nugatory
[40] Counsel for Mr Mahon submitted that if Mr Mahon were to be made bankrupt in advance of the hearing of the appeal then the appeal would be rendered nugatory.
[41] Counsel for Waimauri submitted in response that Beach Arena could continue to prosecute the appeal as it was the second appellant. Moreover, there was still time for the Official Assignee to decide to continue to prosecute the appeal for Mr Mahon, distinguishing this case from Mainzeal v Yan12 where the application to halt was only heard three weeks in advance of the appeal hearing. There, Associate Judge Andrew held that “it would be quite unrealistic for the Official Assignee to come to any position on the appeal in the next few weeks”.13
[42] It appears unlikely, however, that Beach Arena could continue to prosecute the appeal if Mr Mahon is adjudicated bankrupt as Beach Arena, as a company, will require funding to instruct counsel. Furthermore, the Official Assignee is very likely to require funding to continue the appeal on Mr Mahon’s behalf (even if there were time for the Official Assignee to reach a position on the appeal), as noted in Body Corporate 207650 v Singh.14
12 Mainzeal Property & Construction Ltd (in liq) & Ors v Yan [2020] NZHC 1659.
13 At [18].
14 Body Corporate 207650 v Singh [2019] NZHC 1547 at [35]; see also Downtown House (No 2) Ltd v Ensom [2019] NZHC 2566 at [9].
[43] Counsel for Waimauri further submitted that even if the appeal would be rendered nugatory, this does not mean Mr Mahon’s application must succeed with a halt still refused as this factor is outweighed by other factors.
[44] I accept that this is the position in principle and so add the likelihood of bankruptcy rendering the appeal nugatory as a factor to weigh in the exercise of my discretion.
[45] In this case there is also the additional factor that there are other proceedings involving Mr Mahon and Mr Edney’s interests which may be affected as discussed further below.
Pillay factors
Relevance of effect on third parties, importance and public interest
[46] The first three additional factors referred to in Pillay include the effect on third parties, the novelty and importance of the question on appeal and the public interest in the proceeding.
[47] As discussed above, Mr Mahon’s other creditors are in respect of legal fees and a disputed debt with a government department that was approximately $36,000 at the time of the hearing (but subject to further discussions).
[48]Any prejudice to third parties does not, therefore, appear to be significant.
[49] The other two factors: novelty and importance, and public interest, do not appear to be engaged in relation to the appeal. The Court of Appeal in its decision on the extensions of time did not refer to the significance of the issues beyond the parties.15
15 Mahon v Waimauri, above n 8, at [21(e)] and [26].
Overall balance of convenience
[50] Waimauri’s submissions focused primarily on the final Pillay factor, the overall balance of convenience. Counsel outlined Mr Mahon’s failure, despite numerous requests, to provide information about his financial position. In Waimauri’s submission, Mr Mahon’s conduct has been so flagrant that the discretion to halt the bankruptcy application should not be exercised in his favour.
[51] It is useful to consider the correspondence as, in my view, Mr Mahon’s conduct cannot fairly be characterised in that way.
Requests for financial information
[52] The first letter from Mr Mahon’s solicitor recorded that Mr Mahon had limited assets in New Zealand and that his overseas interests had been significantly affected by Covid-19. The letter said Mr Mahon was presently facing a liability to a government department exceeding the judgment sum and that attempting to enforce the judgment may not produce a good outcome for Mr Edney’s interests.16 A payment plan was proposed with interest accruing in the usual way, in accordance with s 12(3) of the Interest on Money Claims Act 2016, except where a payment was not made by the due date, when interest would instead accrue at 15 per cent until paid.
[53] The letter then recorded that an appeal had been filed, and suggested terms for repayment if the appeal was successful. It stated that Waimauri already had the benefit of significant security as Mr Mahon had personally guaranteed the lending to Beach Arena and that no additional security was possible at that time.
[54]There was no reply to this letter.
[55] Mr Mahon’s solicitors wrote to Waimauri’s solicitors again six weeks later proposing a revised payment plan with an earlier start date, recording that Mr Mahon had recently achieved positive outcomes in relation to some property transactions.
16 As set out above, this has now crystallised at $36,000 and is disputed by Mr Mahon.
[56] Waimauri’s solicitors replied the following day saying that in their original letter inviting proposals, they requested full disclosure of Mr Mahon’s assets, liabilities and income so that his financial position could be fully assessed. The letter recorded that this information had not been provided in either of the letters written on behalf of Mr Mahon and repeated their request for financial information, “including financial statements for all of Mr Mahon’s entities together with supporting bank statements”. The letter finished by saying until this information was provided, together with information as to how the proposed payments by Mr Mahon would be funded, their clients could not consider any proposal put forward by Mr Mahon.
[57] Mr Mahon’s solicitors responded on 15 September 2020 saying Mr Mahon, Mr Edney and their interests remained at odds with ongoing litigation on several fronts, referring specifically to the appeal of the decision on which these bankruptcy proceedings are based as well as Waikoro Ltd v Beach Arena Ltd.17 The letter said that Mr Mahon was concerned that if he shared details of his financial affairs in the context of the bankruptcy proceedings, Mr Edney would use that information in other proceedings and that Waimauri’s solicitors’ letter did not offer any protection in that regard.
[58] Waimauri’s solicitors replied on 18 September 2020 saying that they could not see that this information would have any relevance at all to the ongoing proceedings involving Mr Mahon. The letter went on to say that to rely on ss 38 and 42 of the Insolvency Act, Mr Mahon would be obliged to be candid about his financial circumstances, referring to Mainzeal Property & Construction Ltd (in liq) & Ors v Yan.,18 and so disclosure should be made now. Their request for financial information was then repeated including the request for financial statements for all of Mr Mahon’s entities together with supporting bank statements.
[59] Mr Mahon’s solicitors did not reply to this letter prior to Waimauri filing its application for an adjudication order on 7 October 2020.
17 CIV-2019-404-2778.
18 Mainzeal Property & Construction Ltd (in liq) & Ors v Yan, above n 12.
[60] Following the filing of the bankruptcy proceedings, another of Mr Edney’s companies, Small (2005) Ltd (“Small (2005)”), demanded payment from Mr Mahon under a guarantee for an alleged shortfall following the mortgagee sale of properties owned by Coronation Gardens Ltd (“Coronation Gardens”), one of Mr Mahon’s companies. The demand was made by letter dated 29 October 2020.
[61] Mr Mahon then filed a notice of intention to oppose the application for bankruptcy adjudication together with an application to halt the bankruptcy proceeding on 17 November 2020. In his affidavit filed in support of both applications, Mr Mahon set out his financial position, albeit briefly. Mr Mahon further recorded that he remained reluctant to provide financial information as he had no assurance that the information would be used for proper purposes and referred to the demand that had been served on him by solicitors for Small (2005).
[62] Small (2005) then filed proceedings19 against Mr Mahon for payment under its guarantee in respect of the loans to Coronation Gardens. The statement of claim for these proceedings is dated 30 November 2020.
[63] Counsel for Waimauri relied on the correspondence above to submit that Mr Mahon’s offers were not genuine and that the failure to provide the financial information went to the bona fides of Mr Mahon’s position. In Waimauri’s submission, the assertion that the information will be used against Mr Mahon in ongoing litigation does not withstand scrutiny for the following reasons:
(a)the appeal in Mahon v Waimauri Ltd20 cannot be affected as it only concerns the judgment of Muir J which did not touch on Mr Mahon’s present financial position; and
(b)the Waikoro v Beach Arena21 proceedings concern monies owed by Beach Arena under a lease that ran from 2012 to 2016 and there is no claim against Mr Mahon personally in respect of this, so Mr Mahon’s personal financial position is irrelevant to this proceeding.
19 CIV 2020-404-2333.
20 CA 338/2020.
21 CIV-2019-404-2778.
[64] I find the submission on behalf of Waimauri that details of Mr Mahon’s financial position are not relevant to the appeal or to the other proceedings in which the parties are involved hard to accept. Details of Mr Mahon’s financial position must be relevant to settlement of any of these proceedings, even where he is not personally a party. Considering the proceedings:
(a)Waikoro Ltd v Beach Arena proceedings (“Waikoro proceedings”) –
CIV 2019-404-2778
(i)Waikoro Ltd, another of Mr Edney’s companies, is suing Beach Arena in respect of rental arrears and arrears of outgoings under a lease;
(ii)Beach Arena has applied to strike out the proceedings on the basis that it relates to the dispute that is at issue in the judgment underlying the bankruptcy proceedings. Beach Arena has also filed a substantial counterclaim;
(iii)Counsel for Waimauri says the claim is distinct from the claim underlying these proceedings as there is a different plaintiff, different defendant and the claim is made under a different contract. Waikoro has applied to strike out parts of Beach Arena’s statement of defence and two of its three counterclaims on the basis that they were pleaded in the proceeding underlying the bankruptcy proceedings. Both applications were due to be heard on 6 May 2021. As at the date of this decision, it is my understanding that no judgment has yet been issued.
(b)Small (2005) Ltd v Mahon proceedings (“Small (2005) proceedings”)
– CIV 2020-404-2333
(i)In 2018 Coronation Gardens issued proceedings22 against Small (2005). It sought interlocutory orders restraining Small (2005) and Golden Belt Mining Co Ltd (“Golden Belt”) from dealing
22 CIV-2018-404-1910.
with the land in issue. Jagose J’s decision dated 26 September 201823 dismissed the interlocutory application. The proceedings were discontinued on 31 July 2019.
(ii)Small (2005), issued proceedings24 against Mr Mahon as guarantor for an alleged shortfall in repayment of a loan following the commencement of the bankruptcy proceedings;
(iii)the proceeding relates to the sale by Mr Edney’s interests, as mortgagee in possession, of land and property owned by Mr Mahon’s interests, Coronation Gardens, with the sale being to another of Mr Edney’s interests, Golden Belt;
(iv)Mr Mahon has filed a defence and counterclaim alleging sale of the land at a significant undervalue and breach of the mortgagee’s obligations under the Property Law Act 2007.
Other proceedings
[65] Counsel for Mr Mahon says adjudication would prevent Beach Arena and Mr Mahon from defending the above proceedings and pursuing their counterclaims. It was further submitted that the dispute in the Small (2005) proceedings is not a standard “breach of duty by a mortgagee” claim as Mr Edney sold the property to himself in the exercise of mortgagee powers without going through a Registrar sale.
[66] Counsel for Waimauri says that as Beach Arena is the defendant to the Waikoro proceedings, and not Mr Mahon, adjudication of Mr Mahon as bankrupt would not prevent Beach Arena from defending the claim against it.
[67] As recorded above, if Mr Mahon is adjudicated bankrupt, there will be consequences for both proceedings. Beach Arena will inevitably face funding difficulties and the Small (2005) proceedings, being against Mr Mahon personally,
23 Coronation Gardens Ltd v Small (2005) Ltd [2018] NZHC 2512.
24 CIV-2020-404-2333.
will be significantly affected. In my view, both of these proceedings are relevant to my decision whether to halt the bankruptcy proceedings.
Payment plans
[68] Counsel for Waimauri further relies on the failure by Mr Mahon to make any payments on the dates for payment proposed in the letters, submitting that this raises legitimate doubts about the bona fides of the payment plans proposed.
[69] But Waimauri’s solicitors made it clear in the correspondence that Waimauri would not agree to any payment plan until the financial information requested was provided. The Small (2005) proceedings were then filed against Mr Mahon. It is unsurprising that, in the absence of agreement by Waimauri, no payment was made. This is particularly the case where any payment made would not necessarily have prevented adjudication given Waimauri had not agreed to the plan proposed.
Part 17 and financial information requested
[70] Counsel for Waimauri further submitted the financial information sought by Waimauri is routine information that Mr Mahon would have to provide under Part 17 of the High Court Rules. But this is not correct.25 Information was sought in respect of not just Mr Mahon but all of his associated entities.
Final weighing of the s 42 factors
[71] Weighing all of the above factors, in my view, it is appropriate for a halt to be ordered. The key reasons are that there is a definite date for the appeal in September of this year, the Court of Appeal has already determined that the appeal is not clearly hopeless and, if a halt is not ordered, the appeal will be unlikely to proceed. Furthermore, other than not being paid the judgment sum, Waimauri has not claimed any additional prejudice, nor is there evidence of prejudice to other creditors.
25 High Court Rules 2016, r 17.12(3); Hunt v Muollo [2003] 2 NZLR 322 at 325; McCormack v National Australia Bank Ltd (1992) 106 ALR 647 at [649]-[650].
Section 38
[72] Because of the view I have reached on the basis of s 42, I do not go on to consider separately whether a halt should be ordered under s 38.
[73] At this stage I consider that the halt should continue only until final determination of the appeal in respect of the underlying debt with any continuation following that date requiring fresh consideration. If Mr Mahon wishes these bankruptcy proceedings to continue to be halted following final determination of the appeal, to allow him to continue to defend the other proceedings and pursue his counterclaims, a further application can be brought.
Result
[74] For the reasons set out above, I grant the application for a halt of this application for adjudication until the appeal of the claim relating to the underlying debt is finally heard and determined.
Costs
[75]In the usual course, costs follow the event.
[76] Counsel for Waimauri submitted that even if a halt is ordered, costs should be awarded against Mr Mahon because of his continuing refusal to disclose financial information that Waimauri has a right to, or to provide security. In Waimauri’s submission there must, therefore, be costs’ consequences for Mr Mahon.
[77] But as discussed above, Waimauri’s requests for financial information went beyond what they were entitled to and the inability to provide security does not prevent a halt being granted.
[78] Although a halt could be considered an indulgence, Waimauri elected to file bankruptcy proceedings after the appeal of the underlying judgment had been filed and to continue them after the Court of Appeal’s decision extending time for the filing of the case on appeal and the allocation of a hearing date. Bankruptcy proceedings are not automatically halted as a result of an appeal but nor is a failed application for a
stay of enforcement a prerequisite for a halt application for the reasons discussed above. Waimauri could have withdrawn its opposition to the halt application at any time. For these reasons, Mr Mahon is entitled to costs in the usual way on a 2B basis.
[79] I ask the parties to agree quantum. If that is not possible, memoranda may be filed of no more than five pages. Such memoranda should be filed by Mr Mahon within 15 working days of this judgment and Waimauri within 20 working days.
Associate Judge Sussock
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