IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2017-404-1097
[2020] NZHC 1727	

UNDER	the Insolvency Act 2006	
IN THE MATTER OF	The bankruptcy of PETER RICHARD PRESCOTT	

BETWEEN	
NEW ZEALAND POLICE
Judgment Creditor	
AND	PETER RICHARD PRESCOTT
Judgment Debtor	

Hearing:	9 July 2020	
Appearances:	W Fotherby and Alexandra Tumahai for the Judgment Creditor Peter Richard Prescott in person	
Judgment:	9 July 2020	

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:
Meredith Connell (William Fotherby/Alexandra Tumahai), Auckland, for Creditor
Copy for:
P R Prescott, North Shore, Auckland

NEW ZEALAND POLICE v PRESCOTT [2020] NZHC 1727 [9 July 2020]

[1]	This is a bankruptcy proceeding. The Police applied for Mr Prescott to be made bankrupt, alleging that he owed them $44,884.81. That was made up of three orders for costs:

(a)	$27,111.02 ordered by the District Court on 17 October 2016;

(b)	$5,819.00 ordered by Moore J in  an  unsuccessful  application  by  Mr Prescott to stay execution of the District Court judgment;1 and

(c)	$9,923.50 ordered against Mr Prescott when he unsuccessfully applied to set aside a bankruptcy notice.2

[2]	Mr Prescott had sued the Police alleging breaches of rights under the New Zealand Bill of Rights Act 1990. In the District Court, Judge Cunningham dismissed his claim and ordered him to pay costs of $27,111.00. Mr Prescott appealed against the District Court decision and applied for judicial review. On 18 December 2019, Gault J dismissed the appeal and judicial review application but because of the Bill of Rights issues he indicated that costs in the High Court should lie where they fall.3 In a later decision of 30 April 2020, he ruled that costs in the District Court should also lie where they fall, again because of the Bill of Rights issues.4

[3]	In the meantime, the Police had applied for Mr Prescott’s adjudication in bankruptcy. That application was held over to await the hearing of the appeal and the judicial review application. In March 2018, Mr Prescott paid the Police $16,079.39. That cleared his liability to the Police for the $5,819.00 and the $9,923.50 plus interest. The Police continued the proceeding relying only on the District Court costs order. When Gault J set aside the District Court costs order, the Police were no longer a creditor of Mr Prescott. They accept that they can no longer apply for his adjudication. They wish to discontinue the proceeding.

1	Prescott v Police [2017] NZHC 620.
2	Prescott v Police [2017] NZHC 2701.
3	Prescott v Police [2019] NZHC 3376.
4	Prescott v Police [2020] NZHC 847.

[4]	Before that can happen, though, Mr Prescott says that he should be repaid the
$16,079.39 he paid the Police in March 2018. He paid that sum after this proceeding had started and as a way of addressing two of the debts in the Police’s bankruptcy application. Mr Prescott says that as the District Court costs order has been set aside, he should be repaid the other costs he paid which were linked to and owing as a result of his liability for costs ordered in the District Court.

[5]	There have been other procedural aspects. Mr Prescott appealed to the Court of Appeal against various rulings, and there have been other rulings against him. I am not required to deal with them. I will, however, refer to three matters:

(a)	Mr Prescott’s application for a stay of execution which resulted in the costs order of $5,919.00;

(b)	his application to set aside the Police bankruptcy notice; and

(c)	Associate Judge Smith’s decision to halt the decision pending the appeal.5

Other appeals and other rulings are not relevant for this decision.

[6]	After the District Court ordered Mr Prescott to pay costs and he had lodged his appeal, Mr Prescott applied for a stay of execution of the costs application. Moore J dealt with the application under r 20.10 of the High Court Rules. Under that rule, an appeal does not operate automatically as a stay of enforcement of any order appealed from. Instead, the court has the power to order a stay or to grant relief pending the appeal. Moore J applied the standard principles on applications for interim relief pending the appeal. He held that pending the appeal the Police were entitled to the fruits of their success in the District Court judgment, the costs order. The overall balance of convenience allowed the Police to enforce costs while Mr Prescott could still pursue his appeal. Moore J applied similar reasoning when considering whether to grant interim relief  on the application for judicial review.    He found against     Mr Prescott and ordered costs of $5,819.00.

5	Police v Prescott [2018] NZHC 618.

[7]	The Police served a bankruptcy notice on Mr Prescott. The bankruptcy notice was not for the District Court costs  order, but  for the costs  ordered  by Moore J.  Mr Prescott applied to set aside the bankruptcy notice. In my decision on 25 October 2017 dismissing the application, I recorded that Mr Prescott remained free to pursue his appeal, even if he had to pay the costs ordered by Moore J.6

[8]	After that, the Police began the present bankruptcy application in January 2018. On Mr Prescott’s application, Associate Judge Smith made a halt order under  s 42 of the Insolvency Act. The bankruptcy application was held over pending the appeal. Shortly afterwards, Mr Prescott paid the Police the $16,079.39 in March 2018. In April he filed a memorandum asking for that money to be refunded. Associate Judge Smith issued a minute declining to do so:7
[4]  There is no basis for making an order for the return of the money paid by Mr Prescott. The simple fact is that he was liable for the payment he made under a judgment or judgments of the court which had not been stayed. Absent any stay order, a party against whom a judgment has been entered must pay the amount of the judgment, regardless of whether an appeal or review proceeding is pending.

[9]	Mr Prescott now renews the request he made to Associate Judge Smith in 2018 to have the $16,079.39 repaid. He made that request by memorandum. He says that the Police ought not to withdraw the application until his request has been considered. He has not made a formal application on notice, but I do not require it. It is convenient to deal with the matter on the basis of the memoranda and submissions that have been filed. The facts are not in dispute. Mr Prescott has made clear in his memorandum and in his submissions today the basis on which he seeks a repayment. The Police have not been prejudiced and have responded. The payments were made in the course of this proceeding as a way to resist the bankruptcy application. It is appropriate that in the proceeding I consider whether the payments should be refunded.

[10]	Mr Prescott’s argument essentially is this. When Gault J set aside the District Court costs order and held that costs in the District Court should lie where they fall, that had an unravelling effect which meant that all matters flowing from the costs decision should also be set aside. With that, he appears to be relying on the principle

6	Prescott v Police [2017] NZHC 2701.
7	New Zealand Police v Prescott [2018] NZHC 618 at [4].

that when an appeal succeeds, the successful appellant is entitled to have repaid all sums which the appellant may have paid under the judgment appealed from. The general principle is that the successful appellant should be restored to the position it would have occupied had the appellant’s outcome been adopted from the beginning.8 I refer here to the Court of Appeal’s decision in Deloitte Touche Tohmatsu Trustee Co Ltd v Christchurch Pavilion Partnership (No.1).9 That principle can be seen at play in r 20.20 of the High Court Rules, which deals with appeals to this court, and in r 52A of the Court of Appeal (Civil) Rules 2005, which deals with the powers of the Court of Appeal on appeals to that court.

[11]	Certainly if Mr Prescott had paid the $27,111.00 to the Police, he would be entitled to have that money repaid to him as a consequence of Gault J setting aside the costs order. The matter is not, however, so clear-cut with the other costs orders. The question here is whether that general principle applies in the circumstances of those orders.

[12]	I understand that Mr Prescott did try to appeal from those decisions, but for one reason or another his appeals foundered. The orders are effectively final. Notwithstanding their finality, there may be a basis for the court to disregard those orders and to order the money to be repaid. That would be by analogy with r 14.8 of the High Court Rules. That is a rule that deals with costs on opposed interlocutory applications. The rule provides that, unless there are special reasons to the contrary, costs on an opposed interlocutory application must be fixed when the application is decided, and the costs become payable when they are fixed. Notwithstanding that, the rule says that the court may reverse, discharge, or vary an order for costs if the court is satisfied later that the original order should not have been made. To the extent that the court can reverse or vary an order for costs, there is an exception to the finality principle.

[13]	I give examples how these principles might work. Take an ordinary civil proceeding in which there are interlocutory applications, for example, on discovery.

8	Kung v Fitton [2017] NZHC 670.
9	Deloitte Touche Tohmatsu Trustee Co Ltd v Christchurch Pavilion Partnership (No.1)
[2002] 3 NZLR 215 (CA).

After an opposed hearing one side is ordered to pay costs on a discovery issue. Later, the case goes to a final hearing. At the final hearing, the side ordered to pay costs on discovery ultimately wins and they obtain costs for the final hearing. The fact that they ultimately win does not mean that the costs ordered on the interlocutory application should be set aside. The court may still have given a correct decision on their discovery issue, even if the unsuccessful party on that issue ultimately succeeded.

[14]	On the other hand, think of a case of an interim injunction where the defendant is restrained from carrying out some activity until the case is finally heard. When the case is finally heard, the court finds that the injunction ought not to be continued. It is also found, in light of all the evidence, that it was wrong to have restrained the defendant at the outset. In those situations, the court would set aside any order for costs made against the defendant on the initial interim injunction application. That is, with the benefit of hindsight, it can be seen that the original order ought not to have been made.

[15]	That  offers  some  assistance  in  establishing   how   I  should   deal   with Mr Prescott’s application. Mr Prescott failed in his application to stay execution of the District Court costs order. The fact that Gault J set aside the District Court costs order does not, in my view, by itself mean that Moore J’s decision was incorrect. Even with hindsight it cannot be said to have been wrongly decided. Moore J applied well- recognised  principles.  He  weighed  relevant  considerations,  and  he  held  that   Mr Prescott could still pursue his appeal even if enforcement of the judgment was not stayed. Mr Prescott’s success on appeal may instead be seen as vindication of Moore J’s decision because he was able to continue his appeal. In other words, the argument that the rule in r 14.8(2) of the High Court Rules should be applied by analogy in the present situation does not assist Mr Prescott in having Moore J’s costs decision set aside.

[16]	I apply a similar approach for the costs order on the application to set aside the bankruptcy notice. The bankruptcy notice was upheld, as Moore J’s costs order gave a proper basis for a bankruptcy notice. Mr Prescott’s appeal against the District Court decision did not give grounds for setting aside the bankruptcy notice. Again, the fact

that Gault J set aside the District Court decision does not provide any reason for now regarding my decision not to set aside the bankruptcy notice as wrongly decided.

[17]	In short, those costs decisions have their own independent validity notwithstanding that Mr Prescott ultimately succeeded in having the District Court costs decision set aside. Accordingly, because those costs decisions still stand, the Police can be treated as always entitled to enforce them and are entitled to retain the money that Mr Prescott paid them in March 2018. The setting-aside of the District Court costs decision does not provide any reason for holding that the Police were not a creditor of Mr Prescott for the other costs orders.

[18]	Accordingly, I cannot see a basis for requiring the Police to refund the
$16,079.39 to Mr Prescott. With that, I grant leave to the Police to withdraw the application against Mr Prescott and make no further orders.

[19]	After I gave my decision, Mr Prescott advised that he intended to appeal against my decision. I rule that my decision does not fall within s 56(3) of the Senior Courts Act 2016 and that Mr Prescott is entitled to appeal as of right without first seeking leave of the court. Mr Fotherby did not demur.

………………………………
Associate Judge R M Bell