THE OFFICIAL ASSIGNEE V BASSETT AND ANOR HC AK CIV-2005-404-004380 [2009] NZHC 1065 (18 August 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                      CIV-2005-404-004380



                       BETWEEN                      THE OFFICIAL ASSIGNEE
                                                   
Plaintiff

                       AND                          LAWRENCE NELSON BASSETT
                                         
          First Defendant

                       AND                          WILLIAM HENRY HAWKEN
                            
                       Second Defendant


Hearing:               12 August 2009

Appearances: N F D Moffatt for Plaintiff
      
      Second Defendant in Person

Judgment:              18 August 2009 at 5.00 p.m.


                                 JUDGMENT
OF VENNING J
                      On the application of the second defendant to set aside




This judgment was delivered by me
on 18 August 2009 at 5.00 pm, pursuant to Rule 11.5 of the High
Court Rules.


Registrar/Deputy Registrar

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




Solicitors:            Bell Gully, Auckland
Copy to:               William H Hawken, Auckland




THE OFFICIAL ASSIGNEE V BASSETT
AND ANOR HC AK CIV-2005-404-004380 18 August 2009

Introduction


[1]     On 15 April 2008 Associate Judge Robinson ordered that
the defendants were
to pay the plaintiff $105,000 together with interest and costs. Mr Hawken seeks to
set aside that order insofar
as it relates to him.


[2]     Although the application can be introduced simply, the factual and procedural
background to it are
rather more complicated.


Background


[3]     Mr Bassett was adjudicated bankrupt on 7 August 2002.           The Official
Assignee's
investigation into his affairs identified a payment of $105,000 made by
Mr Bassett to a bank account in the name of Dominion Hall
Society Trust just eight
days prior to Mr Bassett's adjudication. Mr Bassett and Mr Hawken were trustees of
the Dominion Hall Society
Trust. The Official Assignee examined both Mr Bassett
and Mr Hawken about the payment. The Official Assignee was not satisfied with
the
explanations provided and on 3 August 2005 issued a notice to set aside the
disposition pursuant to s 58 of the Insolvency Act
1967. Mr Bassett and Mr Hawken
then jointly applied to this Court for an order reversing the notice to set aside the
disposition.


[4]     The matter proceeded to a defended hearing before Associate Judge Doogue
on 30 October 2006. The applicant and Mr Bassett
were represented by the same
solicitor. The Judge delivered a decision rejecting their application to set aside and
effectively upholding
the Official Assignee's notice. For reasons it is unnecessary to
traverse in this judgment, the judgment was recalled and the matter
set down for a
fresh hearing. That second hearing proceeded before Associate Judge Robinson on
14 and 15 April 2008.        At that
hearing, the solicitor who had acted for both
throughout was excused and granted leave to withdraw as the applicants had failed to
provide him with instructions. Mr Bassett and Mr Hawken therefore represented
themselves on the application. Mr Bassett and Mr Hawken
both appeared on the
first day of the hearing. Mr Bassett was still under cross-examination by counsel for

the Official Assignee
at the end of the first day. On the morning of the second day
Mr Hawken failed to appear. The Judge had inquiries made as to why
Mr Hawken
was not present. The Judge recorded the following explanation:

       At first, the Court was informed that Mr Hawken
had missed his boat from
       Waiheke Island but anticipated being here at 11.00 a.m. It subsequently
       transpires that Mr
Hawken has no intention of coming here. Mr Bassett
       advises that in a telephone conversation with Mr Hawken, Mr Hawken
   
   appeared and confirmed that he was drunk, still at home without any
       intention of coming to the Court.

[5]    In other
hearings before the Court and also in the current application before
me Mr Hawken has confirmed that was an accurate record of the position.


[6]    Mr Bassett then discussed his position
with his former solicitor and elected to
withdraw the application he had made (with Mr Hawken) to set aside the notice
issued by
the Official Assignee. The Judge recorded that such an application to
withdraw was entirely appropriate. He then reviewed the application
and evidence
in summary and made orders pursuant to s 58(2) of the Act directing both Mr Bassett
and Mr Hawken to pay the $105,000
plus interest and costs.


[7]    The Official Assignee then issued bankruptcy proceedings against Mr
Hawken. In response to those
bankruptcy proceedings, on 24 November 2008 Mr
Hawken applied to set aside the bankruptcy notice. The application to set aside the
bankruptcy notice has been adjourned a number of times and currently stands
adjourned pending the outcome of this application.


[8]    Mr Hawken initially sought leave to review the decision of Associate Judge
Robinson. The application to review was dismissed
by Keane J on 1 July 2009 for
want of jurisdiction. In dismissing the application Keane J directed Mr Hawken to
file and serve any
application to set aside the judgment, leaving open the issue of
jurisdiction for such an application, by 15 July 2009. Mr Hawken
subsequently filed
this application to set aside. The application is opposed by the Official Assignee.

Jurisdiction


[9]    The
first issue is the jurisdictional basis for the application. Mr Hawken
relied upon the observations of Associate Judge Robinson when
adjourning the
application to set aside the bankruptcy notice to the effect that Mr Hawken may have
a valid defence to the notice
setting aside the disposition and the Court might
exercise its inherent jurisdiction to set aside on that basis. In papers before
the Court
Mr Hawken submitted the Court had inherent jurisdiction to set aside the judgment
and referred to the decision of Holmes
Construction Wellington Limited v Rees &
Ors HC AK CIV 2006-404-4219 9 February Associate Judge Faire.


[10]   Mr Moffatt submitted
there was no jurisdiction to set aside the judgment and
that the effect of the withdrawal was that the proceedings were discontinued.
He
submitted there was no other basis in the High Court Rules in which a defended
application could be withdrawn by the applicants
during a hearing.


[11]   On Mr Moffatt's analysis, as the application had been discontinued, Mr
Hawken's only alternative was to
seek to have the discontinuance set aside. He
noted that r 15.22(1) provides a discontinuance may be set aside if the
discontinuance
is an abuse of process of the Court and submitted that it could not
possibly be said that the discontinuance was made for an improper
purpose in this
case so that the discontinuance should not be set aside.


[12]   In my judgment, neither Mr Hawken nor Mr Moffatt
are correct in their
analysis of the jurisdiction issue. The inherent jurisdiction referred to in the cases
relied upon by Mr Hawken
was an inherent jurisdiction of the Court to control the
abuse of its process in relation to bankruptcy notices. The authorities
he referred to
do not support an inherent jurisdiction to set aside a judgment.


[13]   Nor, with respect to Mr Moffatt's submissions,
am I able to accept that what
occurred in the circumstances of the hearing on 14 and 15 April 2008 was a
discontinuance by Mr Hawken.

[14]   At the relevant time the applicable rule relating to discontinuance was r 475
which provided:

       475     Right to discontinue
proceeding

       (1)     A plaintiff may, at any time before the giving of judgment or a
               verdict, discontinue a
proceeding by--

               (a)     filing a notice of discontinuance and serving a copy of the
                       notice
on every other party to the proceeding; or

               (b)     orally advising      the    Court    at   the   hearing   of 
 the
                       discontinuance.

       (2)     A notice of discontinuance under subclause (1)(a) must be in form
               34E.

       (3)     This rule
is subject to rule 476.

[15]   Importantly, the rule provided that a plaintiff could discontinue by filing a
notice of discontinuance
or orally advising the Court of the hearing of the
discontinuance.      Mr Hawken did neither.                Also a principal feature
of a
discontinuance is that it must be effected prior to judgment. Once a proceeding has
been discontinued, it is at an end. The
point of a discontinuance is to prevent the
entry of judgment or adverse orders. The discontinuing party is then free, subject to
paying the costs on the discontinuance, to come again without facing the issue of a
judgment against them. That is not what occurred
in this case.                   No notice of
discontinuance was filed, the Court was not orally advised of a discontinuance and,
what is more, the Judge proceeded to deliver a judgment and make orders against Mr
Hawken.


[16]   The starting point to considering
the procedural implications of the judgment
is to consider the application before the Court and the nature of the orders made by
Associate Judge Robinson in the judgment following the hearing on 14 and 15 April
2008. The application before the Court was an application
to set aside the notice
issued by the Official Assignee under s 58 of the Insolvency Act. Section 58
provides a procedure to enable
the Assignee to recover property where the Assignee
considers a disposition is voidable. The first step in that process is to file
and serve a
notice setting aside the disposition. Section 58 then provides a number of ways the
notice may be enforced by orders
of the Court, including orders directing the person

to whom the disposition was made to transfer to the Assignee the property or
to pay
to the Assignee a sum not exceeding the value of the property when the disposition
was set aside.    Associate Judge Robinson
made such an order, under s 58(2).
Although he referred to the order being made under s 58(2)(a) the order he made was
in the nature
of an order to pay which is more appropriately made under s 58(2)(b).
But nothing turns on that as the Judge had jurisdiction to
make the orders once the
application to set aside the notice was withdrawn or dismissed.


[17]   There were effectively two matters
before Associate Judge Robinson at the
hearing. There was the application to set aside the notice issued by the Official
Assignee.
It was implicit in the Official Assignee's opposition to that application
that in the event the application to set aside was unsuccessful
the Official Assignee
would seek orders in accordance with s 58 to give effect to the notice. If there is no
challenge to the notice,
then a pro forma application to the Court for orders would
follow. If, as in this case, there is a challenge to the notice and the
notice is
dismissed, the Court must then be in a position to make orders under s 58. Formal
orders under s 58 are the other side
of the coin to the challenge to the notice and will
follow the withdrawal or dismissal of an application to set aside the notice
setting
aside a disposition. Neither Mr Bassett nor Mr Hawken could have been in any
doubt about the possible outcome following the
earlier decision of Associate Judge
Doogue, even though that judgment was ultimately recalled.


[18]   In my judgment the current
application is to be analysed as an application to
set aside a judgment obtained in the absence of a party. That is practically what
occurred in this case. In Mr Hawken's absence his application to the Court was
either withdrawn by Mr Bassett on his behalf, or if
Mr Bassett did not have authority
to do so, it was dismissed by the Judge and orders under s 58 were made against him.


[19]   The
appropriate rules at the time were rr 484 to 486. The rules apply to
proceedings, which this application was as an application under
the Insolvency Act
1967: r 448.


[20]   Rule 485 reads:

       485     Where only defendant appears

       If the defendant appears but the plaintiff does not, the
defendant,--

       (a)     If he does not admit the claim, shall be entitled to judgment
               dismissing the proceeding;
and

       (b)     If he has a counterclaim, shall prove it so far as the burden of proof
               lies on him.

[21]   The
application, or challenge to the notice was by both Mr Bassett and Mr
Hawken. Mr Bassett withdrew his challenge. Even if he did not
have authority to
withdraw it on behalf of Mr Hawken, Mr Hawken did not appear to support it. Rule
485 applied. There was no appearance
for or by Mr Hawken. At that stage the
Official Assignee was entitled to an order dismissing Mr Hawken's application to set
aside
the challenge to the notice. There can be a withdrawal or failure to support a
case during the course of the proceedings which has
the effect of engaging r 485:
Chase Wellington Properties Limited v Hughes  (1989) 3 PRNZ 121. The order
sought by the Official Assignee under s 58 was in the nature of a counterclaim. The
Judge accepted the Official Assignee's
claim under s 58 and made orders
accordingly.


[22]   Mr Hawken's application is an application to set aside the judgment entered
in his absence. As from 1 February 2009 r 10.9 applies. It reads:

       10.9    Judgment following non-appearance may be set aside

       Any verdict or judgment obtained when one party does not appear at the trial
       may be set aside or varied by the court
on any terms that are just if there has,
       or may have been, a miscarriage of justice.

[23]   Even if r 10.9 does not apply,
in my judgment the principles that have
developed in relation to the application of that rule should apply to this case in any
event,
consistent with r 1.6.


[24]   The test under r 10.9 is ultimately whether it is just in all the circumstances to
set aside the
judgment: Russell v Cox  [1983] NZLR 654 confirmed in Mathieson v
Jones CA198/92 11 February 1992.

[25]   The Court will consider inter alia:


       ·   Whether the applicant's
failure to appear was excusable.


       ·   Whether the proposed defence has substance.


       ·   Whether the opposing party
may suffer irreparable injury if the judgment
           is set aside.


       ·   Whether the applicant's solicitor/counsel had
withdrawn and the
           circumstances of that.


       ·   The applicant's attitude to the proceeding, particularly if it has
been
           casual or cavalier.


       ·   Any delay by the applicant in applying to set aside the judgment.


[26]   In the
present case Mr Hawken's failure to appear on the second day of the
hearing on 15 April was inexcusable. Mr Hawken suggested that
he did not attend
the second day of the hearing because he was told, both by his solicitor and the
solicitor for the Official Assignee,
that he was not required for cross-examination.
That advice was correct. He was not required for cross-examination. However, it
was
his application, he was aware that the solicitor had withdrawn on the first day
and that his application was to be pursued the next
day. His failure to appear on 15
April cannot be excused. When the Court adjourned the hearing and made inquiries
as to his whereabouts
the Court was advised that he was on Waiheke Island and had
no intention of coming to the hearing. He was aware that he should be
there but had
decided not to attend. His non-attendance that day was deliberate.


[27]   Next Mr Hawken has substantially delayed
in applying to set aside the
judgment. The judgment was entered on 15 April 2008. For over 10 months he took
no steps to directly
challenge the withdrawal of the application or the judgment
under s 58.    The first application he filed to challenge the judgment
was his

application to review the judgment filed on 26 February 2009. He did not file
earlier, even though he had earlier applied
to set aside the bankruptcy notice.


[28]      While the solicitor acting for the applicants had withdrawn, Mr Hawken was
aware
he had withdrawn and that he and Mr Bassett were representing themselves on
the application. Mr Hawken suggested that he was not
aware of the consequences
that might flow from the hearing on 14 and 15 April. That is misleading. At para 7
of his affidavit sworn
on 24 November 2008 in response to an application to set
aside the bankruptcy notice Mr Hawken stated that prior to the hearing before
Associate Judge Robinson:

          I became aware that judgment could be entered against me and that could
          attach personal
liability.

[29]      That must be right. Mr Hawken could have been left in no doubt as to the
possible outcome if the application
was unsuccessful because of the earlier judgment
of Associate Judge Doogue which, while it had no status as it had been recalled,
would have made Mr Hawken aware of the potential consequences if he did not
appear.


[30]      When one stands back and looks at
the matter overall Mr Hawken's attitude
to the whole proceeding has been casual at best. Even if Mr Bassett had no authority
on behalf
of Mr Hawken to withdraw the application insofar as it related to Mr
Hawken, Mr Hawken's non-appearance meant that he did not prosecute
the
application. Essentially it had the same effect as a formal withdrawal of the notice
by Mr Bassett.


[31]      That leaves consideration
of the merits of Mr Hawken's application to set
aside the disposition, and whether Mr Hawken has a defence of substance. Mr
Hawken
relies on the Associate Judge's observations when he adjourned the
application to set aside the bankruptcy notice. The Judge suggested
that Mr Hawken
may be able to argue that he received the property as a bare trustee with reference to
the cases of Re Spencer, Hamilton
v Official Assignee HC HAM B112/97 Hammond
J 24 September 1999 and Vandervell v IRC [1966] UKHL 3;  [1967] 2 AC 291.

[32]   With respect to the Associate Judge's observations, however, the case of Re
Spencer is distinguishable. In Re Spencer there
was clear evidence that Ms Hamilton
had received $207,000 from Mr Spencer (the bankrupt) and paid it into her bank
account to avoid
Mr Spencer's ex-spouse taking the money out of Mr Spencer's
account.   Ms Hamilton deposed that on Mr Spencer's instructions, (and
in his
company) from time to time she withdrew the money and gave it back to Mr
Spencer. In those circumstances Hammond J held, after
considering the case of the
House of Lords' decision in Vandervell that Ms Hamilton was a bare trustee of the
money. She had simply
agreed to hold it for Mr Spencer who could have sued her
for the money.


[33]   In the Vandervell case the House of Lords confirmed
that a bare trustee is one
who holds the property in question for the beneficial owner. The beneficial owner
owns both the beneficial
estate and is in a position to give the bare trustee directions
in regard to the legal as well as the equitable estate. But that
is not the case in the
present situation. The money was paid to Dominion Hall Society Trust. It was paid
to both Mr Bassett and Mr
Hawken as trustees of that trust. Mr Bassett was not the
sole beneficiary of the trust. The trust was not constituted for Mr Bassett's
sole
benefit and he did not have the right to direct how the property held by the trust
should be disposed. The explanation given
by Mr Bassett and Mr Hawken for the
moneys being paid to the trust was that it was effectively a repayment of moneys
previously advanced
by the trust to Mr Bassett.        That is quite different to the
payment of money to another on the understanding the other will
hold the money as
a trustee, as in the case of Spencer. Mr Hawken was not a bare trustee.


[34]   Mr Hawken also submitted that
one half of the moneys deposited in the
account were effective repaid on behalf of Mrs Bassett so that only one half might
relate
to Mr Bassett. The only evidence provided to the Court on behalf of the
applicants was by Mr Bassett. Mr Hawken did not make an affidavit.
Mr Bassett
said that he was authorised by Mr Hawken to make the affidavits. The explanation
Mr Bassett gave for the payments was
that the trust had advanced money to him and
his wife to build a home at Albany. He suggested that the advances were initially
made
in 1996 and 1997. It was only in his third affidavit dated 15 August 2006 that
Mr Bassett raised for the first time that half of
the $105,000 paid was paid by his

wife as a repayment by her. Mr Bassett's evidence changed throughout the hearing.
The records
of the trust, such as they are, do not support his evidence.


[35]   It is apparent from his judgment that the Associate Judge rejected
Mr
Bassett's explanation for the payment to the trust and did not accept that it was a
repayment, either by Mr Bassett or his wife.


[36]   That leaves the last point identified by the Associate Judge in his judgment,
namely that an order under s 58 is discretionary.
An order under s 58(2) for the
transfer of the property or any part of it back to the Assignee under (a) or payment to
the Assignee
not exceeding the value of the property when the disposition was set
aside under (b), is to be read with s 58(6).


[37]   Section
58(6) provides that the recovery by the Assignee of any property or
the value thereof may be denied wholly or in part if:

     
 (a)     The person from whom recovery is sought received the property in
               good faith and has altered his position
in the reasonably held belief
               that the transfer or payment of the property to him was validly made
              
and would not be set aside; and

       (b)     In the opinion of the Court it is inequitable to order recovery or
             
 recovery in full, as the case may be.

[38]   There was no evidence before the Associate Judge (and there is no evidence
before
this Court) to suggest that subs (6)(a) applies. Nor is there any evidence to
support a finding that it would be inequitable to order recovery of the money. Mr
Hawken chose
not to give evidence to the Court.


[39]   In short, at the time the money was paid both Mr Hawken and Mr Bassett as
trustees were
in control of the trust and the disposition of the money. Mr Hawken
was an active trustee. In a letter of 19 September 2002 he wrote
to the Official
Assignee in his capacity as trustee advising that Mr Bassett had been given notice of
his exclusion as a beneficiary
under the trust deed. In the same letter Mr Hawken
effectively acknowledged receipt of the $105,000 by the trust from Mr Bassett.


[40]   In summary, the merits of any defence by Mr Hawken to the Official
Assignee's claim, now represented by the judgment, are
weak at best.

Result


[41]     For those reasons I decline the application to set aside the judgment entered
against Mr Hawken.
There is no proper excuse for Mr Hawken's non-appearance,
Mr Hawken has delayed substantially in bringing an application to set aside
and has
displayed a cavalier attitude towards Court processes. The merits of his claim are
weak at best.


Costs


[42]     The Official
Assignee is entitled to costs on this application which I fix on a
2B basis.




                                               __________________________
                                               Venning J