Wollams v Zurich Apartments Limited (In Liquidation) HC Ham CIV 2007-419-001438

[2008] NZHC 2436

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2007-419-001438

IN THE MATTER OF     the Insolvency Act 1967

AND

IN THE MATTER OF     the bankruptcy of JI Woollams

BETWEEN  JAMES IVAN WOOLLAMS Judgment Debtor

ANDZURICH APARTMENTS LIMITED (IN LIQUIDATION)

Judgment Creditor

Hearing:         30 July 2008

Counsel:         CY Simes for judgment debtor

DM O'Neill for judgment creditor

Judgment:      30 July 2008 at 1630

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for order for security for costs]

Solicitors:           Evans Bailey, PO Box 19 149, Hamilton for judgment debtor

Nielsen Law, PO Box 1108, Hamilton for judgment creditor

WOOLLAMS EX PARTE  ZURICH APARTMENTS LIMITED (IN LIQUIDATION) HC HAM CIV 2007-

419-001438  30 July 2008

[1]      The judgment debtor applies for an order for security for costs.

[2]      The application is made in reliance on r 60 of the High Court Rules.   The relevant parts of r 60 are as follows:

60       Power to make order for security for costs

(1)      Where the Court is satisfied, on the application of a defendant,—

…

(b)That there is reason to believe that a plaintiff will be unable to  pay  the  costs  of  the  defendant  if  the  plaintiff  is unsuccessful in the plaintiff's proceeding,—

the Court may, if it thinks fit in all the circumstances, order the giving of security for costs.

[3]      In AS McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 at [13], [14], [15] and [16] the Court of Appeal gave helpful guidance as to the approach that should be taken on applications for security for costs.  For the reasons which I shall outline shortly in this judgment, it is not necessary to review those matters further.

[4]      The application, in this case, is both novel and unusual.  It is made in respect of a petition filed by the judgment creditor seeking the adjudication of the judgment debtor as a bankrupt.

[5]      The judgment debtor does not dispute, in his notice of opposition, that he has not complied with the bankruptcy notice which was served on him.  In short, the act of bankruptcy is admitted.  What is alleged, however, is that:

a)        application was made to the District Court to set aside the judgment on which the bankruptcy notice was based; and

b)the judgment debtor claims he has a set-off or counterclaim in an amount in excess of the amount of the judgment.

[6]      Neither counsel addressed the Court on the issue of whether r 60 applies to a petition issued under Part 16 of the High Court Rules.   In Gray v Legal Services Board 11 PRNZ 687, Potter J expressed the view that a bankruptcy petition is not a

proceeding in the High Court.   It would follow from such a conclusion that r 60 could not apply to a bankruptcy petition.  It is not necessary that I resolve the issue in this case because there is a clear answer to the application on the merits.

[7]      The  petitioning  creditor  is  currently  a  judgment  creditor  in  respect  of  a judgment against the judgment debtor for $15,141.29 plus interest and costs.  That judgment followed an application to set aside the original judgment on which the bankruptcy notice was based.  In short, the first ground mentioned in the notice of opposition would seem to have been disposed of.  I was advised, however, that there was an application to the District Court Judge to recall the latest judgment with a view to inviting the Court to reduce it to $8,797.76 plus interest and costs.

[8]      Counsel’s estimate of the time required for the hearing of this petition is one day.  An analysis of the likely costs if one supposed that the petitioning creditor lost the application on all grounds and was ordered to pay costs, indicates that a total cost of  something  less  than  $8,500  would  be  the  maximum  that  could  be  ordered. Counsel for the judgment debtor readily agreed that if this was simply approached on a quantum basis, an order for security for costs of approximately $7,000 was what might be justified.

[9]      The existence of the judgment which the judgment creditor has against the judgment debtor provides the security for any claim for costs in this case.  In short, if the judgment debtor is successful and obtains an order for costs its effect is simply to reduce the amount owing under the judgment which is currently enjoyed by the judgment creditor.  On that basis, there simply can be no justification for the making of an order for security for costs in this case.

[10]     In arriving at that conclusion, there is no need for me to consider the position of the judgment creditor, which is a company in liquidation, because it is the existence of the judgment itself which provides adequate security.

[11]     In my view, the application for security for costs is plainly misconceived in this case and should not have been brought.

Orders

[12]      The application for security for costs is dismissed.

Costs

[13]     Counsel for the judgment debtor advised that the judgment debtor was in receipt of legal aid.   Mr O’Neill sought an order pursuant to s 40(5) of the Legal Services Act 2000.  But for the grant of legal aid I would have made an order for costs  against  the  judgment  debtor  based  on  Category 2  Band B  together  with

disbursements as fixed by the Registrar.

JA Faire

Associate Judge