Fuati v Jin [2023] NZCA 281 (6 July 2023)

Last Updated: 10 July 2023

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

CA219/2022 [2023] NZCA 281

	BETWEEN	MUSABAYOUFU FUATI Appellant
	AND	ZUORU JIN First Respondent OFFICIAL ASSIGNEE Second Respondent

Counsel:	P C Murray for Appellant D Z Zhang and E T Tie for First Respondent No appearance for Second Respondent
Judgment: (On the papers)	6 July 2023 at 9.30 am

JUDGMENT OF GILBERT J
[Costs]

A The appellant must pay costs to the first respondent in the sum of $8,365.
B The Registrar is to pay the sum of $7,060 held as security for costs to the first respondent in part satisfaction of the appellant’s costs liability.
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REASONS

[1] Mr Fuati was adjudicated bankrupt on 11 April 2022 for non-payment of costs that were awarded against him by the High Court in favour of Mr Jin. Mr Fuati’s appeal against the order for adjudication was dismissed by this Court on 11 May 2023.^[1] Mr Jin now seeks an award of costs for successfully resisting the appeal.

[2] Mr Fuati opposes the application. He says that because no award of costs was made in the judgment, costs should lie where they fall. However, if costs are to be awarded, he challenges various aspects of Mr Jin’s calculation. He contends that costs should be calculated in the sum $8,365, not $11,113.50 as claimed. Mr Fuati also seeks a direction that the amount he paid as security for costs should be refunded to him on the basis that any costs award is a debt provable in his bankruptcy under s 232(1)(b) of the Insolvency Act 2006.

Should costs lie where they fall?

[3] The issue of costs was not dealt with in the judgment. I can see no reason why costs should not follow the event in the usual way.

Calculation of costs

[4] Mr Murray, for Mr Fuati, challenges Mr Jin’s claim for costs in respect of the following items: (a) filing a memorandum setting out additional grounds to support the judgment; (b) a joint memorandum seeking the allocation of a hearing; (c) a joint memorandum seeking a timetable for the exchange of submissions; (d) filing a list of issues; and (e) an allowance for second counsel. I consider these objections are well made. Mr Murray advises that the joint memoranda (items (b) and (c)) were prepared by counsel for Mr Fuati. In these circumstances, Mr Jin can hardly claim costs for these memoranda, which are not allowed for in sch 2 of the Court of Appeal (Civil) Rules 2005 in any case. Items (a) and (d) are also not allowed for separately in sch 2. I consider the costs of these steps are adequately covered in this case as part of the allowance for preparing for the hearing of the appeal. On balance, I am not persuaded that an allowance for second counsel should be made.

[5] With these adjustments, the amount that should be awarded for costs is $8,365.

Should security for costs be refunded to Mr Fuati?

[6] Section 231(1) of the Insolvency Act defines a provable debt as a debt or liability that a creditor of the bankrupt may prove in the bankruptcy. Section 232(1) defines what a provable debt is:

232 What debts are provable debts

(1) A provable debt is a debt or liability that the bankrupt owes—

(a) at the time of adjudication; or

(b) after adjudication but before discharge, by reason of an obligation incurred by the bankrupt before adjudication.

[7] The costs in respect of this appeal were incurred after Mr Fuati was adjudicated bankrupt. It was after all an appeal against the order making him bankrupt. His right of appeal did not arise until the adjudication order was made. It follows that Mr Fuati’s liability for costs on the appeal was an obligation he incurred after adjudication, and he had no liability for these costs at the time of the adjudication. Accordingly, the costs award is not a provable debt. The costs award is not a debt that will be payable from the proceeds of Mr Fuati’s estate in bankruptcy.^[2]

[8] This case is clearly distinguishable from Bradbury v Commissioner of Inland Revenue, the authority relied on by Mr Fuati.^[3] There, the contingent costs liability arose in respect of proceedings that were filed prior to the bankruptcy adjudication.

[9] The amount paid as security for costs on the appeal should be disbursed to the first respondent as the successful party in the usual way.

Result

[10] The appellant must pay costs to the first respondent in the sum of $8,365.

[11] The Registrar is to pay the sum of $7,060 held as security for costs to the first respondent in part satisfaction of the appellant’s costs liability.





Solicitors:
Nigel L Fagan, Auckland for Appellant
Advent Ark Lawyers, Auckland for First Respondent

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^[1] Fuati v Jin [2023] NZCA 165.

^[2] Gibson v Official Assignee [2015] NZHC 3200.

^[3] Bradbury v Commissioner of Inland Revenue [2015] NZSC 80, [2015] 1 NZLR 739. See also Gibson v Official Assignee, above n 2; and Montgomerie v Montgomerie [2021] NZCA 639.