W CRIGHTON & SON LIMITED T/AS CRIGHTON BUILDING CENTRE V KI PILBROW HC WN CIV 2008-485-2426 [2009] NZHC 611 (22 May 2009)

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
                                                                      CIV 2008-485-2426


              IN THE MATTER OF             the Insolvency Act 2006

              AND

              IN THE MATTER OF         
   the Bankruptcy of KATHERINE ISOBEL
                                           PILBROW

              BETWEEN                 
    W CRIGHTON & SON LIMITED
                                           TRADING AS CRIGHTON BUILDING
                           
               CENTRE
                                           Applicant Creditor

              AND                          KATHERINE
ISOBEL PILBROW
                                           Debtor


Appearances: Memorandum of Counsel for the Applicant Creditor
dated 4 May
             2009
             Memorandum of Counsel for the Judgment Debtor dated 11 May
             2009
        
    Memorandum of Counsel for the Applicant Creditor in Response
             dated 15 May 2009

Judgment:     22 May 2009 at 3.00
pm


                        JUDGMENT AS TO COSTS
                   OF ASSOCIATE JUDGE D.I. GENDALL


     This judgment was delivered
by Associate Judge Gendall on 22 May 2009 at
                3.00 p.m. pursuant to r 11.5 of the High Court Rules.




Solicitors:
  Gibson Sheat, Lawyers, PO Box 2966, Wellington
              Collins & May Law Office, Solicitors, PO Box 30 614, Wellington




W CRIGHTON & SON LIMITED T/AS CRIGHTON BUILDING CENTRE V KI PILBROW HC WN CIV
2008-485-2426 22 May 2009
Introduction


[1]   
On 17 December 2008, W Crighton & Son Limited trading as Crighton
Building Centre ("the Creditor") filed an application in this Court
seeking an order
for adjudication in bankruptcy of Katherine Isobel Pilbrow ("the Debtor").


[2]    This application was based upon
an available act of bankruptcy said to have
been committed by the debtor in that she had failed to comply with a bankruptcy
notice
for the sum of $345,535.70 served upon her on 14 November 2008.


[3]    This bankruptcy notice in turn was based upon a default
judgment obtained
by the creditor against the debtor and her husband Steven James Pilbrow ("Mr
Pilbrow") "as trustees of the Pilbrow
Family Trust" for the sum of $345,535.70 on 9
June 2008.


[4]    No appeal of that judgment nor any application to set-aside the
bankruptcy
notice was made by the debtor. Instead, when the creditors application for an
adjudication order came before the Court,
the debtor simply filed a Notice of
Intention to oppose the application. This occurred on 12 February 2009 and was
based on the fact
that the debtor had on 29 January 2009 filed in this Court an
application to set-aside the 9 June 2008 default judgment.


[5]  
 That setting aside application came before this Court and, on 16 March 2009,
Her Honour Justice Mallon gave judgment setting aside
the earlier default judgment
against the debtor. In doing so, as I understand the position, Her Honour accepted
that the debtor had
provided a not entirely unreasonable explanation for her delay in
defending the proceedings against her which had resulted in the
earlier judgment
obtained on an undefended basis. The debtor contended that she had a defence to the
claim based upon undue influence,
mistake and promissory estoppel.             As I
understand it, she maintained that the General Manager of the creditor company
at
the time had advised her that she would not be pursued personally for the debt in
question but presumably only the assets of the
Pilbrow Family Trust, of which she
was a Trustee, and the first defendant in the earlier proceedings, her husband Mr
Pilbrow, would
be pursued.
[6]     In any event, as a result of Her Honour Justice Mallon's decision on 16
March 2009 setting aside the earlier
judgment, counsel for the creditor sought leave
to withdraw the bankruptcy notice and the present proceeding against the debtor.
This occurred at the next call of the present proceeding on 27 April 2009.


[7]     Leave was granted but it was noted that costs were in issue between the
parties. On 27 April 2009,
costs were reserved and a direction made that memoranda
were to be filed with respect to the issue. As I have noted above, those
memoranda
have been filed ­ dated 4 May 2009 from counsel for the creditor, dated 11 May
2009 from counsel for the debtor and dated
15 May 2009 in reply from counsel for
the creditor.


[8]     I have now had an opportunity to consider those memoranda and all the
material before the Court and give my decision on the question of costs.


Costs


[9]     From the memoranda filed it is clear that
both the creditor and the debtor
seek costs here.


[10]    The creditor seeks an order for costs incurred with respect to the entire
bankruptcy proceeding because it maintains that it was put to considerable expense
in pursuing the debtor in bankruptcy without any
notice of the debtor's alleged
defences, defences which were only raised at the eleventh hour prior to the creditor
being ready to
seek an order for adjudication.


[11]    In turn the debtor herself contends that she is the "successful party" in this
proceeding,
having had the basis for the proceeding set aside, and therefore costs
should be awarded in her favour. As an alternative, the debtor
suggests that if the
Court does find some fault against her with regard to the steps taken here, then that
fault should be seen as
lying on both sides, and costs therefore should lie where they
fall.
[12]   At the outset it is useful to set out a chronology of
the events which have
occurred here.


       (a)       5 May 2008 ­ Summary Judgment proceedings in this Court as I
           
     understand it were served on the debtor.


       (b)       9 June 2008 ­ The creditor obtained summary judgment against the
                 debtor before His Honour, Associate Judge Abbott. There was no
                 appearance or defence filed by the
debtor.


       (c)       19 June 2008 ­ This summary judgment was sealed by the creditor.
                 No payment of the judgment
debt was subsequently made by the
                 debtor or any arrangements for payment or security entered into.


       (d)
      14 November 2008 ­ a Bankruptcy Notice was issued and on this date
                 it was served on the debtor.


       (e)
      17 December 2008 ­ The creditor filed its Application for an order
                 adjudicating the debtor bankrupt and this
application               was
                 subsequently served on the debtor. The application was set down for
             
   hearing on 16 February 2009.


       (f)       5 February 2009 ­ The debtor brings and serves her application to set-
      
          aside the earlier summary judgment obtained against her.


       (g)       12 February 2009 ­ The debtor files her Notice
of Intention to
                 Oppose the Application for adjudication and affidavits in support and
                 on 13 February
2009 serves these upon the applicant's solicitors.


[13]   According to the memoranda filed, the principal defence of promissory
estoppel raised by the debtor here was advanced on a particular basis. This was that
a Mr William John Taylor ("Mr Taylor") who held
the role of General Manager of
the creditor from March 2004 until August 2008 is alleged to have told the debtor
that first, she
would not be pursued personally by the creditor with respect to the debt
in question (a business debt which was owing by her husband,
Mr Pilbrow) and
secondly, enforcement steps would not be taken by the creditor against her. Mr
Taylor who ceased to be employed
as General Manager of the creditor from August
2008 swore an affidavit dated 28 January 2009 in support of the debtor's application
to set-aside the summary judgment which appears to confirm these details.


[14]   Accepting that this is the position, what is clear
to the Court here is that the
facts forming the basis for the debtor's defence to the claim against her were fully
known to her for some time prior to February 2009 when she brought
the application
to set-aside the earlier summary judgment.


[15]   In affidavits filed in support of both the application to set-aside
the summary
judgment and the present application the debtor endeavours to explain her reasons
for taking no action in relation to
the order obtained against her until that time in
February 2009. Notwithstanding this, the creditor contends that it had no notice
of
those alleged defences, defences which were advanced at the last minute by the
debtor, and that it served the Bankruptcy Notice
in November 2008 and brought the
bankruptcy proceeding in December 2008 on the basis of its summary judgment
which had not been challenged
at the time in any way, as it was entitled to do. In my
view this argument on the part of the creditor has substance. One cannot
escape the
conclusion that the appropriate course for the debtor under the circumstances here
would have been to seek to set-aside
or stay the Bankruptcy Notice served upon her
in November 2008 as her alleged defences clearly existed at that time. Instead she
did nothing. As a result of this inaction, the creditor incurred further costs by filing
and pursuing the adjudication application.


[16]   And it is clear that, when the summary judgment against the debtor was set-
aside on 16 March 2009 the creditor properly
sought leave to withdraw the
bankruptcy proceeding.


[17]   Unfortunately, under the circumstances here, the debtor has been the
author
of her own misfortune. It was not until the eleventh hour that she chose to oppose
the adjudication application when on 12
February 2009 she filed her Notice of
Intention to Oppose. The creditor was entitled to take the steps it did in reliance
upon the
unsatisfied summary judgment order it had obtained against the creditor
from this Court on 9 June 2008.


[18]   Accordingly, as
I see the position the creditor is entitled to an order for costs
against the debtor here.


[19]   Costs are therefore awarded to
the creditor, W Crighton & Son Limited
against the debtor, Katherine Isobel Pilbrow, with regard to this proceeding on a
category
2B basis together with disbursements as fixed by the Registrar.




                                                      `Associate
Judge D.I. Gendall'