Wishart v Fetherston
[2012] NZHC 2378
•14 September 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-1596 [2012] NZHC 2378
IN THE MATTER OF of the Insolvency Act 2006
AND IN THE MATTER OF the bankruptcy of DENIS JOHN FEATHERSTON
BETWEEN ALISTER JOHN WISHART, JENNIE MARGARET WISHART AND HARBOUR TRUSTEES LIMITED Judgment Creditors
ANDDENIS JOHN FETHERSTON Judgment Debtor
Hearing: 6 September 2012
Counsel: P Hall for Judgment Creditors
J Cox for Judgment Debtor
Judgment: 14 September 2012 at 2.30 pm
RESERVED JUDGEMENT OF ASSOCIATE JUDGE SARGISSON (Set aside bankruptcy notice)
This judgment was delivered by me on 14 Setpember 2012 at 2.30 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................
Solicitors:
Simpson Western, Solicitors, Auckland
Blomkamp Cox Solicitors, Takapuna
WISHART, WISHART AND HARBOUR TRUSTEES LIMITED V FETHERSTON HC AK CIV-2012-404-
1596 [14 September 2012]
Introduction
[1] The judgement debtor, Dennis Fetherston, applies for an order to have a bankruptcy notice issued against him set aside.
[2] The judgement creditors are Alister Wishart, Jennie Wishart and Harbour Trustees Limited as trustees of the Wishart Family Trust. They served the bankruptcy notice on Mr Fetherston on 11 April 2012. The bankruptcy notice relies on a sealed High Court order for costs of $10,825.04 that were awarded to the judgment creditors on their successful application for summary judgment against Mr Fetherston on 29 September 2011.
[3] Immediately upon receiving the bankruptcy notice, Mr Fetherston filed and served his application to set it aside. The application relies on the following grounds:
1.I make application to set aside these proceedings because I have a set-off and counterclaim against the Judgment Creditor.
2.The setoff and counterclaim substantially exceeds the amount claimed by the creditor.
3.That amounts awarded were against a Trust and not myself personally.
4. The application to award costs was an abuse of the Court process.
[4] The judgement creditors oppose Mr Fetherston’s application. In their documents in opposition they seek to have his application dismissed with costs.
Background
[5] On 18 February 2010, the judgement creditors as vendors and Mr Fetherston as purchaser entered into a written agreement for sale and purchase of a property at
225 Beach Road, Campbells Bay. Under the agreement the purchaser was stated to be Dennis John Fetherston and or nominee. At the time of the agreement, the judgement creditors were unaware that Mr Fetherston was an undischarged bankrupt. He was not due to be discharged until 30 October 2011.
[6] The agreement provided for a possession date of 16 April 2010, well prior to a much later settlement date of 31 March 2011. The long-term settlement was an arrangement that the vendors came to regret. Mr Fetherston took possession on 16
April 2010 and duly paid the deposit of $125,000. But when the time for settlement arrived, he refused to settle and thereafter he continued to delay settlement.
[7] Mr Fetherston claims that after taking possession, he became aware that there were issues with the property. The alleged issues pertained to:
(a) Weathertightness problems with the house at the property;
(b)The absence of a code compliance certificate for the erection of the second storey of the house; and
(c) Weathertightness issues with the neighbouring house at 227 Beach Road. He claims that this affected his enjoyment of the 225 Beach Road property because the house at 227 had to be demolished, which resulted in pollution of the immediate environs.
[8] I pause to note that the weathertightness issue relating to 227 Beach Road was not raised as a formal ground in the application to set aside the bankruptcy notice. At the hearing, counsel accepted that it was difficult to establish the issue as one that giving rise to any possible cross claim. I do not see any need to give the issue any further attention in this decision.
[9] Mr Fetherston believes that these issues affected the value of the property at
225 Beach Road and his ability to raise purchase finance. He unsuccessfully sought to negotiate with the judgment creditors for a reduced purchase price and a later settlement date. They declined an extension to complete the purchase of the property.
[10] In 2006 the judgment creditors had carried out repairs to rectify the issues of weather-tightness originating from the monolithic cladding. They say they did so in accordance with the Council’s requirements and the building consent that the Council issued for the work. They acknowledged that they had omitted to obtain a
code compliance certificate which put them in breach of the warranties in the agreement for sale and purchase. However, they say that the breach was due to an oversight and did not greatly affect the value of the property. In early March 2011 they made enquiries of the Council and discovered that the most the Council could do was to issue a letter of acceptance under the Building Act 2004, which it did. In July 2011 they obtained valuation advice as to the effect of having a letter of acceptance and not a code compliance certificate. They were advised that a discount of about $75,000 on the property’s future purchase price was appropriate. They point out that they suggested to Mr Fetherston that he set a sum of money aside in trust until the issue of any diminution in value could be resolved and to allow settlement to proceed.
[11] Mr Fetherston accepts that he never indicated that he was in a position to settle the purchase, either in full or in part. But he says that is because he could not get the judgment creditors to come to an accord as to a fair and reasonable sum to be set aside. The impasse, he says, became an impediment to arranging finance.
[12] On 1 April 2011, the judgement creditors issued Mr Fetherston with a combined settlement notice and notice pursuant to s 29 of the Property Law Act
2007. The notice required Mr Fetherston to settle the transaction within 12 working days after the date of service of the notice.
[13] Mr Fetherston failed to comply with the terms of the notice. On 11 May
2011, the judgement creditors commenced proceedings against him claiming an order for possession of the property under s 28 Property Law Act together with costs. They did so in order to obtain the statutory authority that must be obtained under s
28(4) to exercise the contractual right of cancellation of the agreement for sale and purchase where the purchaser has been let into possession. They also made application seeking summary judgment on the claim for possession in their statement of claim.
[14] Mr Fetherston opposed the application for summary judgment. On 29
September 2011, following a defended hearing, Lang J granted the judgement
creditors’ application for summary judgement and made a possession order to take
effect on 20 October 2011.1 His Honour observes the possession order has “the consequential effect” of cancelling the sale and purchase agreement. Lang J also awarded costs to the judgement creditors on a 2B basis and disbursements totalling
$10,572.74.
[15] Lang J said this on the question whether the plaintiffs were entitled to an order for possession:
[39] The parties have now reached an impasse. Mr Featherston has been in possession of the property for 18 months pursuant to the varied agreement that he and the plaintiffs reached on 31 March 2010. During that time he has paid no rent, and the only outgoings on the property that he has paid are the rates. The plaintiffs have been left to meet their mortgage payments and to meet the cost of insurance.
[40] Mr Fetherston has never indicated that he is in a position to settle the purchase of the property, either in full or in part. It now transpires that he is an undischarged bankrupt. He has not disclosed any details as to how he proposes to fund the purchase of the property. The manner in which the present claims came to light, and have been subsequently developed, suggests that so long as he remains in the property he will continue to find fault with it.
[41] As Regalwood confirms, it was open to the parties to reach agreement prior to the date of settlement regarding a way forward. They did not do that. Mr Fetherston did not raise any claim for set- off prior to the date of settlement. Thereafter he was left with two possible courses of action. The first of these was to cancel the contract. He did not do that. The second was to complete the performance of the contract, which he has now failed to do.
[42] I have concluded that it would be inappropriate to prolong matters further by declining summary judgment. The only claim known to Mr Fetherston as at the date of settlement was extremely weak. The parties should now be free to go their separate ways unless they can reach some form of accommodation within the very near future.
[16] In a further development, Mr Fetherston lodged a caveat against the title to the property. He claims that, on an undisclosed date, he submitted a withdrawal of the caveat and advised the judgement creditors of the withdrawal. Nonetheless, they applied for an order lapsing the caveat. On 1 December 2011, Associate Judge Faire ordered the caveat be removed from the title and made a costs award in favour of the
judgement creditors on a 2B basis.
1 Wishart & Ors v Fetherston, CIV-2011-404-2870, 29 September 2011.
[17] From 6 March 2012 to 16 March 2012, the judgement creditors’ solicitors made demands on Mr Fetherston for payment of the costs awards in respect of both the possession order and the caveat proceeding. Mr Fetherston refused to make payment of the costs awards.
[18] On 22 March 2012, the judgment creditors applied for a bankruptcy notice to be issued on Mr Fetherston. The bankruptcy notice relies only on the costs award made in the possession order proceeding and not on the costs award in the caveat proceeding.2
[19] In seeking to have the notice set aside, Mr Fetherston says that he has cross claims (by way of set-offs or counterclaims) totalling $620,000 against the judgement creditors. He claims that he could not have used the cross claims as defences in the proceedings in which summary judgment was obtained.
[20] The judgement creditors submit that all of alleged cross-claims are spurious and do not meet the statutory requirements for setting aside bankruptcy notices.3
They also submit that the claims are not adequately quantified.
[21] Mr Fetherston also seeks to show that the bankruptcy notice is an abuse of process, a contention that the judgment creditors say is also spurious.
Discussion
[22] Relevantly, s 17 of the Insolvency Act 2006 states:
17 Failure to comply with bankruptcy notice
(1) A debtor commits an act of bankruptcy if –
...
(d) the debtor has not, within the time limit specified in subsection (4), -
...
2 In line with Re Low [1892] QB 148 (referred to in Carlyle v Richardson, HC Wellington B394/96,
12 March 1997).
3 Insolvency Act 2006 s 17(1)(d)(ii) and 17(7).
(ii) satisfied the court that he or she has a cross claim against the creditor
...
(7) In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that –
(a) is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and
(b) the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.
[23] Mr Fetherston must demonstrate that:
(a) He has a cross claim against the judgment creditor which is of true substance and which he genuinely proposes to pursue;4 and
(b) The alleged cross claim is equal to or greater than the judgment debt.
This contention must be supported by evidence because bare assertion as to quantum will not suffice.5
[24] Mr Fetherston must also establish that he could not have used the alleged cross claim as a defence in the 29 September 2011 summary judgment proceeding, which provided the basis for the bankruptcy notice. When considering whether Mr Fetherston could have used the alleged cross claims in the summary judgment proceeding, the emphasis is on legal impediments.6 Practical or factual impediments can be considered but only if there are cogent circumstances. The mere failure to take advantage of an opportunity because of inconvenience or difficulty will not be
enough.7
4 Sharma v ANZ Banking Group (New Zealand) Ltd (1992) 6 PRNZ 386 at 389 approving the approach of Casey J in Clark v UDC Finance Ltd [1985] 2 NZLR 636 at 637.
5 Refer Hedley Ex Parte Milton Bradley (NZ) Limited B1394/89, Auckland High Court, 14 December
1989, pg 9 and Couper v Tui Foods Ltd B304/96, Wellington High Court, 27 September 1996 at 9.
6 Clark v UDC Finance Ltd at pages 639-640 and in Hardie v Booth [2992] 1 NZLR 356 at 362.
7 Stirling v Webb Ross and Co CA 47/86, 24 April 1986 and Harach v Dia HC Wellington CIV-2006-
485-2245 at [22].
[25] The obtaining of a summary judgment is not in itself grounds for arguing that a cross claim could not have been set up in the proceeding. In Sharma the Court of Appeal said:8
A further point debated before us with regard to the meaning of the paragraph relates to the words “which he could not set up in the action”. In the judgment under appeal and also in McKenzie v Leisure Ventures Christchurch Ltd unreported, Tompkins J, 7 June 1990, HC Auckland B215/90, the view appears to have been taken by the learned Judge that a counterclaim cannot be “set up” in a summary judgment proceeding, within the meaning of para (d). With respect, we take a different view. An application for a summary judgment is in terms of r 138 an interlocutory application which may be made in proceedings within the purview of rr 135 to 144. It is not in itself a separate substantive proceeding. In the proceeding in which summary judgment is sought, it is competent for the defendant to file a counterclaim pursuant to r 145, and that is one step that could be taken as part of the process of attempting to satisfy the Court to that effect by affidavit evidence and a draft counterclaim. It seems reasonably clear, however, that in one way or another the counterclaim may certainly be set up. It may or may not persuade the Court to refrain from entering summary judgment. The same applies whether the claim of the defendant is accurately to be described as a counterclaim, set-off, or cross-demand, the precise connotations of which terms do not require discussion now.
The first alleged cross claim
[26] Mr Fetherston’s first alleged cross claim is for $125,000 against the judgment creditors for the refund of his deposit.
[27] Counsel for Mr Fetherston submits that when the Court granted the judgement creditors’ application for a possession order, the judgement creditors did not seek an order that the deposit be forfeited to them. Counsel submits that no orders were made concerning the deposit. Further, he submits, “statutory” cancellation of the agreement for sale and purchase that occurs as a consequence of a possession order is not the same as exercising the contractual entitlement to forfeiture of the deposit. Therefore, the issue of Mr Fetherston’s entitlement to the return of the deposit remains live. It is an issue, he submits, that is genuinely
arguable given the vendors accept that they have been in breach.
8 Sharma v ANZ Banking Group (New Zealand) Ltd (1992) 6 PRNZ 386 at 389. I note that this case was decided under the former provision s19(1)(d) in the Insolvency Act 1967 which is not materially different to s 17.
[28] In essence, counsel’s argument is that the deposit must be returned because the contractual right of forfeiture depends on the contractual right of cancellation of the agreement for sale and purchase. Because there has been statutory cancellation of the agreement, the contractual right to cancellation was not exercised and the contractual right of forfeiture is no longer available.
[29] I am satisfied that the argument is misconceived and that the cross claim is devoid of true substance for the following brief reasons:
(a) Clause 9.4(1)(b)(i) of the agreement for sale and purchase provides that in the event that the purchaser fails to comply with the settlement terms and the vendor cancels the agreement, the vendor is entitled to retain the deposit.
(b)Contrary to counsel for Mr Fetherston’s submission, the vendors did not lose the contractual right to forfeit the deposit. They exercised the right by obtaining an order for possession.9
(c) As counsel for the judgment creditors points out, if a purchaser pays a deposit of no more than 10% of the purchase price and the purchaser subsequently defaults, the vendor cancelling the agreement is entitled to retain the deposit.10 As Mr Fetherston’s deposit of $125,000 equates to only 7.5% of the $1,675,000 purchase price, there can be no doubt about the judgment creditors’ right to retain the deposit.
[30] I also accept the judgment creditors’ submission that Mr Fetherston has no genuine intention to pursue this claim. Counsel for Mr Fetherston explained that he has not exactly been “sitting on his hands”. Tellingly however, he has issued no legal proceedings against the judgment creditors to pursue this claim, though he has
had many months to do so.
9 Property Law Act 2007 s 28(4).
10 Garratt v Ikeda [2002] 1 NZLR 577 at [40] – [44].
The second alleged cross claim
[31] This cross claim is against Prestige, the judgment creditors’ real estate agent, for non disclosure of the weather tightness issues. The cross claim seeks an amount equal to the deposit. Counsel for Mr Fetherston advises that this cross claim is being pursued through the Real Estate Agents Disciplinary Tribunal and is scheduled to be heard in January 2013. I agree with counsel for the judgment creditors’ submission that the claim has no relevance to the current application. It is not a cross claim as defined by s 17. That is because s 17 makes clear that the cross claim must be “against the creditor”, and Prestige is not the creditor in this application. The cross claim is not available therefore to support Mr Fetherston’s application.
The third alleged cross claim
[32] The third cross claim is for $370,000 for compensation against the judgement creditors for loss of contractual benefit. The claim is said to arise by reason of breaches of contractual warranties.11 Mr Fetherston argues that the judgment creditors knowingly breached warranties in the agreement for sale and purchase by failing to disclose that the 1998 renovation works did not receive a code compliance certificate, thereby causing him loss. He says that although remedial works that were undertaken in 2006 to install a cavity and re-clad the exterior did receive a code compliance certificate, much of the 1998 work remained in situ and was not covered
by the certificate, which the judgment creditors must have known.
[33] Mr Fetherston also contends that he has good reason to be concerned that weather-tightness issues remain in respect of the 1998 work. He says that the letter of acceptance for that work does not assume weathertightness as it is not a code compliance certificate and expressly states it does not extend to durability of the
work.
11 Clause 6.1.1(a) of the agreement for sale and purchase provides a warranty that the vendor “had no knowledge of any requisition or outstanding requirement from any local or government authority... which directly or indirectly affected the property in which it had not been disclosed in writing to the purchaser.” Clause 6.2(5)(b) and (c) provide that “where the vendor had done... and where appropriate a code of compliance certificate was issued for those works.
[34] He points out that Lang J said:12
[35] I accept that these issues might potentially form part of a claim that
Mr Fetherston may wish to bring against the plaintiffs...
...
[38] The plaintiffs appear to accept that a claim for breach of warranty might lie in relation to the failure to obtain a code compliance certificate...
[35] Counsel for Mr Fetherston submits that the judgement creditors’ own evidence is that the property diminished in value by $75,000 because it lacked a code compliance certificate for the 1998 works. He submits that the value of the loss of contractual benefit was $370,000 (and could be significantly more) for the following reasons:
(a) In March 2011 the property was assessed by registered valuers as having a market value of $1,810,000. That assessment was on the basis that the property was not affected by weather-tightness issues or the absence of a code compliance certificate;
(b)The property was sold upon repossession as a building affected by weather-tightness issues or the absence of a code compliance certificate for $1,440,000;
(c) Mr Fetherston must have an arguable claim to be “entitled to receive
the benefit of its contract. He anticipated a capital gain of $370,000”.
[36] Mr Fetherston submits that he could not have used the claim as a defence to the 29 September 2011 summary judgment proceeding because the extent of the loss had not been quantified at that time. I note, however, that Counsel for the judgment creditors submits that this cross claim was in fact used as a defence to the summary judgment application and was found to lack merit.
[37] I accept, as did Lang J, that that there might be a potential claim that Mr
Fetherston may wish to bring arising out of the lack of a code compliance certificate
12 Wishart & Ors v Fetherston, CIV-2011-404-2870, 29 September 2011.
for the 1998 works and the resulting breach of warranty. The judgment creditors acknowledge that there has been a breach of contractual warranty. The creditors’ own valuation advice is that there is a likely diminution in the value that a willing purchaser would pay for a property with a letter of acceptance as opposed to a code compliance certificate.
[38] In my view however, putting aside momentarily the issue whether Mr Fetherston “could use” the cross claims “as a defence” to summary judgment in the required sense, he has other difficulties with the availability of the cross claim as a ground for setting aside the bankruptcy notice.
[39] The cross claim lacks substance. The consequence of Mr Fetherston’s decision to affirm the contract rather than to exercise his right of cancellation was that he was in breach when he did not complete his purchase. The vendors proceeded, as was their entitlement, to cancel the agreement. Mr Fetherston candidly accepts that he was not in a position to settle. In those circumstances, it is difficult to see the basis on which he can claim that the judgement creditors caused him harm or loss of contractual benefit or capital gain. There is no evidence to support his contention that the judgment creditors’ breach was the cause of his losing the capital gain that he anticipated. Such a gain ceased to be a realistic prospect (if it ever was) when Mr Fetherston affirmed the agreement but failed to complete his purchase. I can only conclude that Mr Fetherston’s claim is extremely weak and lacking in substance.
[40] As Lang J observed at:
[40] Mr Fetherston has never indicated that he is in a position to settle, either in full or in part. It now transpires that he is an undischarged bankrupt. He has not disclosed any details as to how he proposes to find the purchase of the property.
...
[42] ... The only claim... was extremely weak...
[41] In any event, I am satisfied that the claim fails as an available cross claim because Mr Fetherston’s own case suggests that he does not genuinely propose to pursue it. His counsel advises that he has not brought proceedings against the
judgment creditors as the cost of doing so would simply be too high. There is therefore no basis on which to find that he intends to pursue the claim and that the claim is therefore “genuine” in the required sense.
The fourth alleged cross claim
[42] The fourth cross claim is for $235,000, plus interest and costs, “as lost opportunity value”. It is against the judgement creditors for misrepresenting the historical weathertightness of the property. Counsel for Mr Fetherston appears to argue that Mr Fetherston lost the opportunity to pay the appropriate value taking into account the weathertightness issues. Counsel submits that the judgement creditors failed to disclose at the time of the agreement that the property had been a leaky building and that remedial works were carried out on the property in 2006.
[43] Mr Fetherston argues that the property was affected by weather-tightness issues which were not brought to his attention prior to entering the agreement for sale and purchase. In support of this cross claim, he submits:
(a) The value of a property that was once a leaky home is diminished, even if it is no longer leaking or damaged.
(b) The purchase price under the contract of 28 February 2010 was
$1,675,000 based on his understanding that the property had never had weather-tightness issues.
(c) The judgement creditors subsequently sold the property for
$1,440,000 as a property affected by weather-tightness issues.
[44] Accordingly, he claims $235,000 (the difference between $1,675,000 and
$1,440,000) plus interest and costs as a set-off for lost opportunity value resulting
from the judgement creditors’ failure to disclose weather-tightness issues.
[45] Counsel for Mr Fetherston submits that this claim was not able to be brought into contention as a proper defence to summary judgement. He points out that Mr Fetherston had obtained an independent engineer’s report. It signalled the possibility
that the Council might be in a position to issue a back dated code compliance certificate with a durability waiver. The report also indicated that it was not possible to know the true extent of any remaining weathertightness issues and what further work the Council might require, pending an inspection from the Council’s Durability Team. The effect of stigma might be ongoing in any event.
[46] Counsel for the judgment creditors submits that this cross claim was used as a defence to the summary judgment application and was found to lack merit. The claim, counsel submits, fails to cross the threshold of substance and cannot be raised again.
[47] While I do not agree that the cross claim was found to lack merit in the direct manner that counsel for the judgment creditors submits,13 I accept that the claim is not available under s 17. Whether or not it was used as a defence, on the evidence presently before the court, it does not amount to a defence that has substance. Counsel for Mr Fetherston was unable to point to any evidence that provides the foundation for a cause of action based on an actionable misrepresentation (as opposed to breach of warranty). It is difficult to see what possible merit this claim has. It remains, as Lang J found, a defence that is extremely weak.
Is Mr Fetherston the wrong debtor?
[48] In Mr Fetherston’s application to set the bankruptcy notice aside, one of the grounds is “[t]hat amounts awarded were against a Trust and not myself personally.” In written submissions, counsel for Mr Fetherston submitted that the order for possession proceedings should have been brought against a family trust and not against Mr Fetherston personally.
[49] Mr Fetherston faces an initial problem with this ground. There is a slight difference in the way the ground appears in Mr Fetherston’s application and the way it is argued in submissions. The application suggests that amounts were not awarded
against him personally, whereas the submissions suggest that the possession
13 At [36] Lang J said “I do not consider that this particular issue provides Mr Fetherston with grounds
to delay in completing settlement...”
proceedings were brought against him personally. However, even if I set this initial problem aside, the ground must fail.
[50] The judgement creditors submit, in my view correctly, that Mr Fetherston’s challenge that order for possession proceedings should have been brought against a family trust and not against him personally lacks substance.
[51] There is no dispute that the proceeding in which summary judgment was obtained was brought against Mr Fetherston. Likewise, the purchaser on the agreement is “Dennis John Fetherston and or Nominee” and he provides no evidence that he was acting as a trustee. Nor is there any evidence to show that he was not the purchaser in possession. Moreover, whether he was holding the property as trustee or not makes no difference to the judgement creditors’ entitlement to seek or to obtain an order against him.
[52] It is trite law that a trustee signing a contract is personally liable without limit for the contractual obligations thereby assumed, unless such liability is excluded or limited by the terms of the contract.14 There is no suggestion here of any such extension or limitation and Mr Fetherston is liable to settle the purchase and to deliver up possession as he did not proceed with the purchase.
[53] I also note that the order for costs in the possession order proceeding have been sealed. Even if there were some basis on which Mr Fetherston could argue that the order for costs lacks validity, he cannot seek to use this Court to appeal the sealed orders.15
Was the application to award costs an abuse of the Court process?
[54] Mr Fetherston’s final ground to set the bankruptcy notice aside is that the issuance of the notice was an abuse of Court process. That, he argues, is because the judgment creditors had received notice that he agreed to remove the caveat when they applied for the caveat to lapse. Effectively, he claims, the judgement creditors
obtained an order for the removal of a caveat that no longer existed.
14 Westpac New Zealand Limited v Chahill [2012] NZCA 123 at [14].
15 Hedley Ex Parte Milton Bradley (NZ) Limited HC Auckland B1394/89, 14 December 1989 at 9.
[55] I also reject this ground. My reasons are twofold:
(a) There is no foundation for a finding that the judgement creditors somehow acted in bad faith and nothing other than bare assertion to suggest that the judgement creditors had any binding assurance that Mr Fetherston would indeed remove the caveat. In their assessment, they had good reason to believe that he was playing for time in the hope that settlement would be delayed indefinitely and they would be forced to negotiate a very much reduced price. Not unreasonably, they felt they had no option but to make the application.
(b)But in any event, the bankruptcy notice was not issued in relation to the caveat proceeding. This ground therefore, is simply not relevant to the issue of the creditor’s entitlement to issue a bankruptcy notice based on a unmet order for costs made in the possession order proceedings.
Result
[56] For the above reasons, Mr Fetherston’s application to set aside the
bankruptcy notice is declined.
[57] As the application has failed, the judgment creditors are entitled to an order for costs. I make an order for costs in favour of the judgment creditors on a 2B basis
together with disbursements to be fixed by the Registrar.
Associate Judge Sargisson
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