Slater v Sellman [2019] NZCA 670 (19 December 2019)

Last Updated: 20 December 2019

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA339/2019 [2019] NZCA 670

	BETWEEN	CAMERON JOHN SLATER Appellant
	AND	JOHN DOUGLAS SELLMAN First Respondent OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF CAMERON JOHN SLATER Second Respondent BOYD ANTHONY SWINBURN Third Respondent SHANE KAWENATA FREDERICK BRADBROOK Fourth Respondent

Counsel:	Appellant in person J P Cundy for First, Third and Fourth Respondents
Judgment: (On the papers)	19 December 2019 at 11.30 am

JUDGMENT OF BROWN J
(Review of Deputy Registrar’s decision)

The application to review the Deputy Registrar’s decision declining to dispense with security for costs is declined. Security for costs of $6,600 is payable by Mr Slater by 17 January 2020. ____________________________________________________________________

REASONS

Introduction

[1] Mr Slater is one of several defendants in a defamation proceeding in the High Court at Auckland (CIV-2016-404-1312) in which the three plaintiffs allege they were defamed by Mr Slater in a series of blog posts.
[2] On 23 November 2018 Palmer J, who is case managing the proceeding to trial, granted applications by the plaintiffs that Mr Slater provide further particular discovery and that he attend court to be orally examined on account of his having provided insufficient answers to interrogatories.
[3] On his own application Mr Slater was adjudicated bankrupt on 27 February 2019. Consequently in a joint memorandum of 14 March 2019 with counsel for the Official Assignee, the plaintiffs sought leave to continue the proceeding against Mr Slater under s 76(2) of the Insolvency Act 2006 (the Act). Palmer J granted leave on 20 March 2019.

The High Court judgment

[4] It was contended for Mr Slater that consequent upon his bankruptcy the defamation proceeding was against Mr Slater’s bankrupt estate, which was in the hands of the Official Assignee, and that the proceeding could no longer continue against Mr Slater in person. In the judgment under appeal delivered on 17 July 2019 Palmer J rejected that argument.^[1] The Judge explained:

[26] On the basis of what I have heard so far, I would be inclined to doubt that bankruptcy alters the legal personality of the bankrupt. Rather, I would expect the Official Assignee is empowered to exercise the bankrupt’s rights and powers in a legal proceeding which are related to the bankrupt’s property interests. I would expect a bankrupt continues to be personally responsible for the discharge of duties in legal proceedings which are purely personal in nature and unrelated to any property interest of the bankrupt.

[27] No doubt further argument would elucidate this issue. But I do not need to hear further argument because I do not consider I need decide it. The issue here is whether Mr Slater’s bankruptcy necessarily negates the need to comply with the Court’s orders to date. Irrespective of the default legal effect created by Mr Slater’s bankruptcy, I consider it need not and that it does not.

[28] Section 76(2) of the Act provides that “on the application by any creditor or other person interested in the bankruptcy, the court may allow proceedings that had already begun before the date of adjudication to continue on the terms and conditions that the court thinks appropriate”. That is, if anything, wider than the court’s discretion in the predecessor section which was characterised by the High Court as wide.

[29] Under the discretion, on 20 March 2019, I ordered this proceeding to continue against Mr Slater. I consider it is an implicit term of that order that Mr Slater must comply with orders made against him in the proceeding, which was one of the reasons why the plaintiffs sought its continuation against him. If that was not sufficiently implicit, I now make it explicit under that discretion and/or under the inherent jurisdiction of the High Court to supervise proceedings before it. That means Mr Slater must comply with the court orders irrespective of Mr Henry’s argument about the effect of his bankruptcy. Given that, I do not consider the court and the parties need to incur yet further delays from, and the expense of, argument about that issue. Further argument is not required.

(Footnotes omitted.)

Mr Slater’s application

[5] On 22 July 2019 Mr Slater filed a notice of appeal which named the Official Assignee as second respondent. Security for costs was set at $13,200. On 15 August 2019 Mr Slater applied under r 35(6)(c) of the Court of Appeal (Civil) Rules 2005 (the Rules) for dispensation from security for costs. In a decision dated 20 September 2019 the Deputy Registrar declined that application but directed that security be reduced to $6,600 for the reason that the Official Assignee had been removed as second respondent by an order dated 5 September 2019. Mr Slater seeks a review of the decision declining dispensation.

Relevant principles

[6] The principles applicable to dispensation from security for costs were reviewed by the Supreme Court in Reekie v Attorney-General.^[2] The Court stated that the Registrar should dispense with security if of the view that it is right to require the respondent to defend the judgment under challenge without the usual protection as to costs provided by security.^[3] The Court explained:

[35] ... we consider that the discretion to dispense with security should be exercised so as to:

(a) preserve access to the Court of Appeal by an impecunious appellant in the case of an appeal which a solvent appellant would reasonably wish to prosecute; and

(b) prevent the use of impecuniosity to secure the advantage of being able to prosecute an appeal which would not be sensibly pursued by a solvent litigant.

A reasonable and solvent litigant would not proceed with an appeal which is hopeless. Nor would a reasonable and solvent litigant proceed with an appeal where the benefits (economic or otherwise) to be obtained are outweighed by the costs (economic and otherwise) of the exercise (including the potential liability to contribute to the respondent’s costs if unsuccessful). As should be apparent from what we have just said, analysis of costs and benefits should not be confined to those which can be measured in money.

[7] The Court also ruled that the review function of the judge in relation to security for costs is to be exercised de novo.^[4]

Deputy Registrar’s decision

[8] Having correctly recited the relevant principles from Reekie, the Deputy Registrar put to one side the issue of impecuniosity as no information had been supplied concerning Mr Slater’s capacity to access funding from family or other sources. The Deputy Registrar noted that bankruptcy does not of itself mean that Mr Slater would be impecunious in the context of security for costs.^[5]
[9] The Deputy Registrar saw little merit in the proposed argument that consequent upon his bankruptcy the High Court has no jurisdiction over Mr Slater personally. The Deputy Registrar further observed that, even if this Court were to find that the High Court lacked jurisdiction because Mr Slater personally was no longer a party to the proceeding, it appeared that a subpoena and order for non-party discovery could be issued which would have the same consequence as the orders previously made. The Deputy Registrar recognised that the issue whether bankruptcy generates separate legal personalities had some potential public interest. However she questioned whether that issue would be determined by the appeal, reasoning that this Court, like Palmer J, might simply determine that Mr Slater was within the Court’s jurisdiction either because of the order made under s 76(2) or pursuant to the High Court’s inherent jurisdiction.
[10] The Deputy Registrar concluded:

[18] Mr Slater has not shown he is impecunious. Even if he had, there are no exceptional circumstances to justify dispensing with security for costs. Although the appeal potentially raises an issue of public interest, I do not consider a reasonable and solvent litigant would pursue the appeal because its potential benefits are outweighed by potential costs and its merits seem weak. In my view, it would not be right to require the respondents to defend the judgment under appeal without security for their costs.

Discussion

[11] Mr Slater’s notice of appeal foreshadows that he intends to advance the following contentions:

• As a consequence of his adjudication, two distinct legal personalities arise:
  • (i) the bankrupt estate of Mr Slater, said to be the first defendant in the High Court proceeding; and
  • (ii) Mr Slater in person.
• As a consequence of his bankruptcy Mr Slater in person lost all standing before the High Court because his interests are vested in the Official Assignee under the Act.
• The High Court’s jurisdiction over Mr Slater in person by virtue of his being a party to the High Court proceedings came to an end upon his adjudication.

[12] In my view those contentions are unsound. On an adjudication of bankruptcy a bankrupt’s property vests in the Official Assignee: s 101(1)(a) of the Act. Similarly the powers that the bankrupt could have exercised in respect of that property for the bankrupt’s own benefit vest in the Official Assignee: s 101(1)(b). The right to sue and commence legal proceedings also vests, save for purely personal claims such as for defamation: Schmidt v Pepper New Zealand (Custodians) Ltd.^[6]
[13] The bankrupt estate is not a distinct legal entity. It comprises property to be disposed of by the Official Assignee in accordance with pt 3 of the Act. Any surplus is paid to the bankrupt. Unlike an insolvent corporate body which is wound up and ceases to exist, Mr Slater’s legal personality is unaffected by the bankruptcy. Bankruptcy does not prevent a bankrupt from maintaining involvement in court proceedings, subject to orders being made under s 76(2) of the Act.
[14] It follows that I consider that there is no merit in an appeal which seeks to challenge these well-established principles.
[15] Even if there was scope for argument about what the Judge described as a “nice academic issue”^[7] concerning different legal personalities of a bankrupt and the bankrupt estate, the issue as to whether Mr Slater is subject to the High Court’s jurisdiction in the extant High Court proceedings, and hence must comply with the orders made for discovery and attendance for oral examination, is resolved by the fact of an order having been made under s 76(2). In such circumstances no issue of public interest arises.
[16] Consequently it is my view that a reasonable and solvent litigant would not wish to proceed with an appeal of the nature which Mr Slater has filed. It follows, applying Reekie, that this is not a case where an order should be made for dispensation from the requirement to pay security for costs.

Result

[17] The application to review the Deputy Registrar’s decision declining to dispense with security for costs is declined. Security for costs of $6,600 is payable by Mr Slater by 17 January 2020.

Solicitors:
Lee Salmon Long, Auckland for First, Third and Fourth Respondents

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^[1] Sellman v Slater [2019] NZHC 1666.

^[2] Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.

^[3] At [31].

^[4] At [23].

^[5] Musuku v Commissioner of Inland Revenue [2017] NZCA 509 at [5].

^[6] Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [24].

^[7] Sellman v Slater, above n 1, at [25].