IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001779 [2015] NZHC 1046

BETWEEN	JANE BOND
Plaintiff	

AND	
ROBERT MATTHEW ALLOWAY Defendant	

Hearing:	22 October 2014	

Appearances:	
R J MacDonald for the Judgment Creditor
J Hunter for the Judgment Debtor	

Judgment:	
19 May 2015	

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 19 May 2015 at 10.00 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Norris Ward McKinnon, Hamilton

A Gilchrist, Auckland
J Hunter, Auckland

JANE BOND v ROBERT MATTHEW ALLOWAY [2015] NZHC 1046 [19 May 2015]

[1]       The judgment creditor, Jane Bond, seeks an order for 2B costs following the judgment debtor’s withdrawal of his application to set aside the bankruptcy notice she served upon him.  The judgment debtor, Robert Alloway, was granted leave by the Court to withdraw the application upon his advice that he did not wish to proceed with the application but would instead pay the amount outstanding under the bankruptcy notice.

[2]       Mr Alloway opposes costs.  He says that the bankruptcy notice was an abuse of process, and it should not have been issued.

Costs – the relevant principles

[3]       The Court has complete discretion on all matters relating to costs.1  This discretion is to be exercised in a principled way, the general presumption being that costs should follow the event.2

[4]       The discontinuance of proceedings attracts essentially the same presumption. Rule 15.23 of the High Court Rules provides that unless the Court orders otherwise, a plaintiff that discontinues a proceeding must pay costs of and incidental to the proceeding up to and including discontinuance.

[5]       The  withdrawal  of  an  application  to  set  aside  a  bankruptcy  notice  is analogous to discontinuance by a plaintiff. As such, it attracts the same presumption.

[6]       The presumption may be displaced, but there must be good reason as in the case of discontinuance.  In such a case it has been said that the presumption of costs on a discontinuance is not necessarily displaced merely because the plaintiff acted reasonably in bringing and discontinuing the proceeding, though these are relevant
factors.3

1	High Court Rules, r 14.1.
2	Rule 14.2(a).
3	Vector Gas Ltd v Todd Petroleum Mining Company Ltd HC Wellington CIV-2004-485-1753,
7 December 2010 at [18].

[7]       In   the  event   of  discontinuance  the  Court   should   not   embark   on   a consideration of the merits. Generally the merits are best tested through the trial process, outside of which it would be unsafe to form conclusions (unless the circumstances  are  such  that  the  merits  are  obvious).   As  Tompkins  J  noted  in North Shore City Council v Local Government Commission:4

To the extent that … submissions involve an examination of the respective merits of the claims of the parties as bearing on the costs issue, I do not accept them. It is now well established that as a general rule, in considering costs on a discontinuance, the Court will not consider the merits of the competing contentions. I state this as a general rule because I accept that there will be some circumstances where the merits, one way or the other, are so obvious that they should influence the costs issue. But save in those circumstances, the Court should not embark on a consideration of the merits.

[8]       The Court may however consider the reasonableness of the stance of each party in commencing or defending the proceeding.   The Court will also consider, where relevant, pre-commencement conduct and the reason for discontinuing, such as a change of circumstances rendering the proceeding unnecessary.5

[9]       Additionally His Honour noted the English Court of Appeal’s approval of the

following approach:6

… the real point at the end of the day is that one just has to look at the state of the action as it is at the time when the application is made and see what the fair and just thing to do is at that moment and time. Obviously in doing that one has to take a variety of different matters into account.

[10]     The question whether the party that has withdrawn proceedings did so as promptly as it should have has been noted as a further factor of potential relevance.7
Considerations such as this are, however, only relevant factors.

4	North Shore City Council v Local Government Commission, (1995) 9 PRNZ 182, at 186.
5	At 186.
6	At 187, citing Britannia Life Assurance of Scotland v Smith, EWCA, unreported, 8 June 1995
7	Anglesea Medical Properties Ltd v Braemar Hospital Ltd HC Hamilton CIV-2006-419-1492,
9 October 2007.

Application of the principles to this case

[11]     The bankruptcy notice sought $5,030 based on two costs orders made in the Family Court (including costs of the certificate of judgment), plus specified sums by way of interest and costs on the bankruptcy notice of $748.

[12]     The grounds upon which Mr Alloway says that the bankruptcy notice was an abuse of process and should not have been issued are essentially threefold:

(a)	That the bankruptcy notice was defective because:

	(i)	It overstated the amount owing, as he had paid the amount of

one the costs award claimed in the notice, by a payment made	
		on 8 May 2014.   This payment, he contends, means that the	
		notice is for an incorrect and misleading amount, as credit should be given where due;	
	
(ii)	
It did not acknowledge that security was available for the sums claimed  pursuant  to  an  order  of  the  Family  Court,  and	
		Ms Bond in fact had security; and	

(b)	
Ms	
Bond  adopted  conflicting  positions  in  this  Court  and  the	
Family Court as to his solvency.  In this court by issuing a bankruptcy notice she asserted that he was insolvent while in the Family Court she said she believed he was able to pay maintenance.

[13]     These first two grounds substantially reflect some of the grounds relied upon by Mr Alloway in support of his application to set aside the bankruptcy notice and by pursuing them in support of costs he is essentially seeking that I make a finding on the merits of his application. This is not a case in which it is appropriate to make such findings as the merits of his case are very much in dispute:

(a)       Ms Bond denies that the notice was for an incorrect amount. Though she does not dispute that she received a payment from Mr Alloway, she says his point is ill-founded and answered because there were in

fact three costs awards in her favour.  If by mistake the payment was applied to one of the two awards referred to in the notice it is of no consequence.   In an overall sense the payment left an outstanding balance that was well in excess of the amount claimed in it, and therefore there was no overstatement of the amount owed to her.

(b)       Ms Bond does not accept that she has security for the amount of the debt based on unpaid costs awards claimed in the notice. Had security been  given  for  the  costs  awards  claimed  in  the  notice  to  the satisfaction of this Court or Ms Bond pursuant to s 29 of the Insolvency Act  then  that  plainly  would  be  relevant,  but  there  is nothing before me that establishes that occurred.

(c)       There is no obvious abuse of process arising from the making an application for maintenance and at a later time testing solvency by issuing a bankruptcy notice based on an unfilled  judgment debt.

[14]     Mr Alloway’s case is also not without its inconsistencies.  On the one hand he says  the  bankruptcy  notice  overstates  the  amount  owing,  but  on  the  other  he contends that security was available for the two sums claimed in the notice.

[15]     Additionally, even if the money he paid was applied to the wrong judgment debt (and therefore that the amount claimed in the bankruptcy notice was therefore mistakenly overstated), Mr Alloway does not dispute that one of the judgment sums on which the notice was based had not been paid.   A bankruptcy notice is not rendered invalid simply by reason of an overstatement in the amount of the debt, unless  the  bankrupt  fulfils  requirements  of  s  30  Insolvency  Act  2006.    And Mr Alloway appears to have recognised the reasonableness of the notice by paying not only what he says the correct amount for the notice was, but the overall balance owing on all three judgment debts.   In so doing he has satisfied the bankruptcy notice, abandoned his entitlement to have his grounds of opposition determined on the merits (including the merits of his claims based on defects in the notice and an alleged counterclaim), and he has withdrawn his application.  Having withdrawn the application he holds the onus of identifying sufficient factors to displace the general

presumption that (as the withdrawing party) he should pay costs.  I am not satisfied that  he  has  discharged  that  onus.    He  has  failed  to  show  why,  by making  the application and then belatedly satisfying the notice and withdrawing the application, he should not be treated as having put Ms Bond to the unnecessary cost of formally responding.

[16]     In the circumstances Mr Alloway must expect to provide some compensation to Ms Bond for the steps she has been put to in order to respond to the application.

Result

[17]     There will be costs on a 2B basis to the judgment creditor plus costs to be fixed by the Registrar.  If there is any dispute as to the amount, it is to be referred to
me.

Associate Judge Sargisson