Working Capital Solutions Holdings Limited v Pezaro
[2015] NZHC 906
•1 May 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-1305 [2015] NZHC 906
WORKING CAPITAL SOLUTIONS HOLDINGS LIMITED
v
SARAH JANE PEZARO
Hearing: On the papers Judgment:
1 May 2015
JUDGMENT OF NATION J
[1] On 9 October 2014 Associate Judge Osborne made orders formally setting aside a bankruptcy notice issued against the judgment debtor by the judgment creditor and ordering the judgment creditor to pay costs in the sum of $2,277.
[2] On 15 October 2014 the judgment creditor filed an interlocutory application on notice for review of that decision.
[3] When the matter was first called in a List Court before Whata J on 5
November 2014 he considered there could be an issue as to whether this Court had jurisdiction to review a costs order and called for submissions on the issue.
[4] Submissions were filed for the judgment creditor.
[5] On 4 March 2015 I issued a Minute confirming that this Court did have jurisdiction to deal with the application for review. I directed the review would
proceed as a full rehearing but indicated that I proposed to deal with the review on
WORKING CAPITAL SOLUTIONS HOLDINGS v PEZARO [2015] NZHC 906 [1 May 2015]
the basis of a consideration of all documents filed with the High Court in the bankruptcy proceedings, including the costs application, but with due regard to the application for review, the affidavit in support of the application from Mr Wein and the affidavit of Ms Pezaro in opposition.
[6] I directed that if either party wished to make further submissions, they must do so by filing written submissions on or before 20 March 2015 and indicated I would carry out the review after that date.
[7] I also directed that, if either party wished to have a hearing in relation to the application for review, they must inform the Court of this wish in writing on or before 20 March 2015.
[8] Further submissions were filed for both the judgment debtor and the judgment creditor on 20 March 2015. Neither party requested a hearing.
[9] I accordingly now give my decision on the application for review.
[10] Associate Judge Osborne recorded in his Judgment that the judgment creditor had issued a bankruptcy notice against the judgment debtor in relation to a District Court Judgment. He then stated “the debtor applied to set aside the bankruptcy notice upon the basis that she had (before the bankruptcy notice was issued) applied to the District Court to set aside the Judgment (which had been obtained by default).” He then went on to record that the parties had agreed to adjourn the debtor’s application in the High Court to await the outcome of the District Court hearing, and the District Court had now set aside its previous Judgment. He then formally set aside the bankruptcy notice.
[11] With regard to costs, the Judge noted that the judgment debtor, while self represented in the High Court, was seeking to recover a portion of costs she had incurred in obtained legal advice relevant to the proceedings. He noted that the judgment creditor had opposed any order for costs upon the basis that there was no jurisdiction to award such costs but had made no submissions as to the merits of the amount claimed.
[12] Associate Judge Osborne carefully considered various Judgments where Courts had considered what costs a lay litigant might be entitled to recover. He adopted, as the principle to be applied in this case, a statement from Lord Reid in Malloch v Aberdeen Corp (No 2):1
… the petitioner [should] be allowed such sums as were reasonably necessary for him to spend in order for him to prepare his written case and equip himself to appear and argue his case in person.
[13] The Judge noted that the debtor had filed an appropriate drafted application and affidavit in support, and when opposition was filed an additional affidavit, again appropriately drafted. He noted that, on a 2B approach, the costs recoverable under the schedule would have been $3,980, that the debtor had incurred costs of $2,277 relating to the bankruptcy proceedings, that she had been successful with her application, and it was thus just that the creditor pay the debtors costs in the sum sought.
[14] The judgment creditor applies for review on the grounds the Associate Judge had erroneously relied on the fact that the judgment debtor had applied to set aside the default Judgment against her before the bankruptcy notice was issued, the judgment creditor had been entitled to issue the bankruptcy notice when it did on the basis of the default Judgment from the District Court and it had no notice of the filing of an application to set aside the District Court Judgment before it served the bankruptcy notice. The judgment creditor claimed it was thus entitled to costs for filing and service in relation to the bankruptcy notice.
[15] With the application for review was an affidavit of 14 October 2014 from the judgment creditor’s solicitor, Mr Wein, detailing the chronology with regard to the obtaining of the default Judgment in the District Court, the filing of a request for the issue of a bankruptcy notice, the ultimate issue and service of that notice and subsequent receipt of an application to set aside the District Court Judgment and
later application to set aside the bankruptcy notice.
1 Malloch v Aberdeen Corp (No 2) [1973] 1 All ER 304.
[16] In an affidavit in response to Mr Wein’s affidavit, Ms Pezaro said that she had made it clear to Mr Wein, in communications between 6 June and 26 June 2013, that she “intended to apply to set aside both the Judgment and the bankruptcy application if they decided to continue action without addressing the various issues (she) had” relating to the claim that had been made in the District Court.
[17] In a further submission she said “the timing of the various applications may be unfortunate” but reiterated that the judgment creditor had been aware of her intentions at the time the bankruptcy notice was issued.
[18] In a submission for the judgment creditor, Mr Morris submitted there was no evidence the judgment debtor had made the judgment creditor aware of her intention to set aside both the District Court Judgment and the bankruptcy notice. He also said that, in any event, there was a distinction between expressing an intention to do something and actually doing it. He submitted there was a period of 32 days between the sealing of the Judgment in the District Court on 20 June 2013 and service of the bankruptcy notice on 22 July 2013, so there had been ample time for the judgment debtor to file and serve an application to set aside the Judgment. He submitted the judgment creditor acted appropriately in serving a bankruptcy notice without knowledge of the application to set aside Judgment, that the judgment creditor ultimately “lost the foundation for its bankruptcy notice through no fault of its own” and should not have been penalised through an award of costs.
[19] In the application for review, the judgment creditor sought an order that the judgment debtor pay the judgment creditor’s costs of and incidental to the application for review and the costs for issuing and attending to service of a bankruptcy notice.
[20] The application for review is effectively an appeal against an exercise of a discretion. For the appeal to be successful, the judgment creditor must show:
(a) an error of law or principle;
(b) the Judge took irrelevant considerations into account;
(c) the Judge failed to take relevant considerations into account; or
(d) the decision was plainly wrong.
[21] That test has been applied by the High Court in reviewing a decision of an
Associate Judge to award costs.2,3
[22] On reviewing documents filed by both parties in the bankruptcy proceedings and the documents filed by both parties on this application for review, I am satisfied that the relevant chronology was as follows:
20 June 2013 – District Court seals Judgment against the judgment debtor.
2 July 2013 – District Court issues certificate of Judgment.
9 July 2013 – Solicitor for judgment creditor requests Registrar of the High Court to issue bankruptcy notice.
11 July 2013 – Judgment debtor applies to District Court to set aside District Court Judgment (Ms Pezaro says she filed the application on that date and an affidavit in support of that application was sworn before a Deputy Registrar of the District Court on that date).
12 July 2013 – Judgment creditor posts cheque for filing fee to the High Court.
15 July 2013 – The High Court issues bankruptcy notice.
17 July 2013 – Judgment creditor by letter requests process server to serve bankruptcy notice.
24 July 2013 – Date of District Court notice to judgment creditor of application made to the District Court to set aside Judgment for call on 17 September 2013.
26 July 2013 – Judgment debtor served with bankruptcy notice.
2 Kacem v Bashir [2010] NZSC 113
3 Grant v Pandey [2013] NZHC 3323
application to set aside Judgment in the District Court with advice of hearing date of
17 September 2013.
30 July 2013 – Judgment debtor files application in the High Court to set aside bankruptcy notice (the date on the application to set aside bankruptcy notice and the date on the front sheet of an affidavit in support was 15 July 2013 but the affidavit was sworn before a Deputy Registrar on 30 July 2013).
31 July 2013 – Judgment debtor sends to judgment creditor by email application to set aside bankruptcy notice for call on 5 September 2013.
28 August 2013 – Judgment creditor files notice of opposition to application to set aside bankruptcy notice on grounds the District Court Judgment had not yet been set aside, the basis for bankruptcy notice was still valid and the appropriate course of action was to adjourn the application to set aside the bankruptcy notice to allow the application to set aside the Judgment in the District Court to be heard.
5 September 2013 – Associated Judge Matthews, by consent, adjourns application to set aside bankruptcy notice to 24 October 2013 pending District Court Judgment set down for hearing on 15 September 2013.
24 October 2013 – by consent, application to set aside bankruptcy notice adjourned to 5 December 2013 as application to the District Court had not been heard.
5 December 2013 – Associate Judge Osborne adjourns application to set aside bankruptcy notice to May 2014 given District Court’s interim Judgment identifying issues requiring further evidence and allocation of a resumed hearing and interim order that enforcement of the District Court Judgment against the judgment debtor be stayed. Associate Judge Osborne also noted “Although the creditor filed opposition to the application, the parties accepted that the appropriate course of action was to adjourn the debtor’s application in this Court for an order setting aside the bankruptcy notice to await the outcome of the District Court hearing.”
list on 18 September 2014 as District Court to consider the matter again on 26
August 2014.
18 September 2014 – Application adjourned to 9 October 2014.
6 October 2014 – Ms Pezaro files memorandum seeking costs. Mr Wein responds for judgment creditor.
9 October 2014 – Associate Judge Osborne makes order formally setting aside the bankruptcy notice and giving Judgment as to costs.
[23] I note that in his memorandum of 6 October 2014, Mr Wein had indicated the judgment creditor was opposing Ms Pezaro’s application for costs. He did not seek an order for costs in favour of the judgment creditor but did state that if the Court considered that a portion of the legal costs incurred by Ms Pezaro could be considered as an appropriate disbursement, then the judgment creditor requested to be heard on “these matters”, which appeared to be in relation to “the merits of the amount claimed”. He did not respond in any way to the submission Ms Pezaro made in relation to costs that “the judgment creditor was aware of issues with the Judgment relied upon prior to filing for bankruptcy, including numerous letters from myself and intervention by the FMA the Friday before the application was filed on a Monday”.
[24] In opposing this application for review, Ms Pezaro provided the Court with copies of email correspondence to the solicitor for the judgment creditor. In an email of 16 June 2013 she had made various criticisms in relation to the judgment creditor’s business but stated “I am aware that I have not filed a defence and therefore your client can now obtain judgment”, but stated “please be aware that any attempt to bankrupt me will result in an application for an injunction on the basis that the above information was not available to me in the time I had to file a defence”.
[25] Ms Pezaro produced an email of 25 June 2013. In that email she appeared to be providing information or responding to assertions that had been made for the judgment creditor in relation to criticisms she had made earlier. In relation to what
Edward cannot win against me as I have nothing of value”.
[26] In correspondence annexed to her affidavit in support of her application to set aside the bankruptcy notice, there was an email of 6 June 2013 to Mr Wein in which she said her “reason for not filing a defence in relation to the above claim (the District Court claim) is a financial one and is not based on the validity or otherwise of the plaintiff’s concerns”.
[27] I am satisfied Associate Judge Osborne was correct in referring to the fact that the application to set aside the District Court Judgment had been filed before the bankruptcy notice was issued. I find, however, there was a material error in that he did not take into account as a relevant consideration the fact the judgment creditor did not have notice that such an application had been made, either when it asked the Court to issue a bankruptcy notice or when it arranged for that notice to be served on the judgment debtor.
[28] That error requires me to set aside the costs order which has been made and requires me to make my own assessment as to what, if any, order as to costs should be made in favour of either party.
[29] All the information that has been made available to me satisfies me that the judgment creditor was entitled to seek the issuing of a bankruptcy notice when it did, and that although the judgment debtor had indicated she would take further steps if the judgment creditor obtained a judgment against her and sought to enforce that judgment, she consciously took the risks that she knew could be associated with not seeking to defend the proceedings in the District Court.
[30] I also find that the judgment creditor acted responsibly in relation to the application to set aside the bankruptcy notice in agreeing to an adjournment of that application pending the District Court’s decision on the application to set aside the original District Court Judgment and that it acted appropriate and responsibly in not opposing the application for the setting aside of the bankruptcy notice when the District Court did set its Judgment aside.
[31] The judgment creditor had incurred the filing fee and legal costs associated with the issuing and service of a bankruptcy notice. Those costs should have been weighed in the balance when the issue of costs between the parties was being determined.
[32] In dealing with the issue now, I do nevertheless take into account the fact that the District Court Judgment, which was the basis for the issuing of the bankruptcy notice, was ultimately set aside. I also note that, in his memorandum as to costs, Mr Wein has said nothing as to the circumstances in which it had obtained the bankruptcy notice and nothing in response to the submission from Ms Pezaro that the judgment creditor had always known of the issues she had raised as to the Judgment which had been obtained in the District Court. The judgment creditor must therefore bear some responsibility for the fact there had to be this review with the need to provide the further detailed information which I have now been able to consider.
[33] I accordingly set aside the order which Associate Judge Osborne made as to costs.
[34] In the exercise of my discretion, I find that neither party is entitled to costs against the other, either in respect of the issuing of the original bankruptcy notice, the application to set aside that bankruptcy notice and this application for review.
Solicitors:
Stace Hammond, Auckland
S J Pezaro, Auckland
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