Payne v New Zealand National Party [2012] NZHC 3465 (17 December 2012)

Last Updated: 8 January 2013

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2009-476-000571 [2012] NZHC 3465

UNDER the Insolvency Act 2006

IN THE MATTER OF the bankruptcy of ROGER JOHN PAYNE BETWEEN ROGER JOHN PAYNE

Judgment Debtor

AND NEW ZEALAND NATIONAL PARTY Judgment Creditor

Hearing: 13 December 2012

Appearances: Mr R J Payne (Judgment Debtor) in person

D R Forman for Judgment Creditor

Judgment: 17 December 2012

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

[1] Mr Payne was adjudicated bankrupt on 19 September 2012. [2] On 21 September Mr Payne filed an application titled:

URGENT APPLICATION FOR AN URGENT INJUNCTION TO STOP THE SEALING AND PUBLICATIONS OF ASSOCIATE JUDGE MATTHEWS FATALLY FLAWED BANKRUPTCY DECISION OF 19 SEPTEMBER 2012, RECEIVED BY RESPONDENT ON 20 SEPTEMBER 2012, UNTIL A PROPER FAIR HEARING OF RESPONDENT’S APPLICATION FOR ADJOURNMENT OF THE INSOLVENCY ACTION OF 14 SEPTEMBER 2012 CAN BE HEARD. THE OPPOSING COUNSEL HAS SERIOUSLY MISLED THE COURT IN A MEMORANDUM NOT SERVED ON THE RESPONDENT PRIOR TO THE FATALLY FLAWED HEARING ON 18 SEPTEMBER 2012 THAT PRECEDED THE FATALLY FLAWED DECISION ON 19 SEPTEMBER 2012.

ROGER JOHN PAYNE V NEW ZEALAND NATIONAL PARTY HC TIM CIV-2009-476-000571 [17

December 2012]

[3] This application was referred to me. As it sought an injunction I referred it to Chisholm J, as Civil List Judge of the Christchurch Registry. He referred it to Fogarty J. Fogarty J directed that the application be served on counsel for the judgment creditors who had applied for the adjudication. On 1 November 2012 he held a telephone conference with Mr Payne, in person, and Mr Forman, counsel for the judgment creditor.

[4] The Judge issued a Minute which speaks for itself; for present purposes it is sufficient to say that the application was given a fixture before me on 13 December, as a result of the Judge directing that the application is to be treated as an application to recall the order. The Judge noted that in accordance with usual practice the order would not be sealed until the fixture, which I take to be the release of this judgment on Mr Payne’s application.

[5] In the days prior to the fixture, in a series of communications with staff at the Registry of the Court at Christchurch, Mr Payne objected strongly to my hearing the application. These were referred to me, but I did not respond as I thought it appropriate that if a formal application were made for me to recuse myself, it should be argued at the fixture and in the presence of counsel for the judgment creditor. However, I was aware of the terms of r 11.9 of the High Court Rules, by which a Judge may recall a judgment at any time before a formal record of it is drawn up and sealed. No doubt this time limitation is the reason for Fogarty J directing that the order not be sealed until the application had been heard.

[6] The difficulty immediately raised by Mr Payne’s requests that I not hear the application is that the rule provides for a Judge to recall a judgment, and it is established that a judgment can only be recalled by the Judge who issued it. The consequence of my not hearing the application would, therefore, have been that it could not be heard at all. As pressure mounted on the Registry staff to allocate a different Judge to the fixture, I advised the Registrar of this point, and authorised her to communicate it to Mr Payne in the hope that it would assist him in understanding why the application had been set down in front of me in the first place, and why it remained scheduled for me to hear despite his concerns. That is not to say that but for this position, I would necessarily have recused myself; on the material I have

seen it does not appear as though grounds for recusal are made out. Nor has counsel for the judgment creditor had an opportunity to be heard on that point, should he have wished to do so.

[7] Mr Payne did not object to my hearing the application at any stage during the presentation of his case before me.

[8] Mr Payne was adjudicated bankrupt after a bankruptcy notice issued against him had expired. The notice was issued in reliance on a judgment of this Court for costs, which had not (and for that matter has not) been paid. The judgment sum was

$8,457.65; the order to pay it was made on 19 June 2009.

[9] Mr Payne spent some time setting out for me in considerable detail the background to the award of costs against him, which founded the bankruptcy notice on which the adjudication was based. It is not necessary that I set this out in detail, as the application now before me cannot, for reasons I will give shortly, succeed. However, I will summarise the events which have given rise to Mr Payne’s firmly held view that he should not be required to pay this debt to the respondent. All the facts I record were given to me in court, but were given in argument, not as sworn evidence.

[10] On 25 May 2005 Mr Payne was adjudicated bankrupt by Associate Judge Gendall in the Wellington High Court. Some three weeks later the adjudication was annulled, under the statutory annulment process provided in the Insolvency Act. As part of that process Mr Payne paid the debt on which the bankruptcy notice in that case had been based.

[11] Although the annulment terminated Mr Payne’s bankruptcy, the effect of the adjudication in bankruptcy was to be far reaching, and laid the foundation for the issues which gave rise, eventually, to the debt owing to the judgment creditor.

[12] Mr Payne has a considerable interest in politics. He has had a career which has included various roles in public service. In 2008 he was interested in being appointed by the National Party as its candidate for the newly formed Selwyn

Electorate, at the next General Election. He obtained the requisite number of nominations, filed the application for nomination, and received a letter rejecting it, without any reason for that rejection given. Mr Payne felt that he had been unfairly treated. He took various steps to have the decision reconsidered and, as a result, nominations were called for once more. He put in a new nomination but again it was rejected without a reason given.

[13] After considering his position Mr Payne decided to apply for an injunction, as the candidate selection process was underway. In an initial telephone conference with the Judge on that application, the Judge indicated that as the National Party was a private organisation there appeared to be little that the Court could do to intervene in its internal processes. According to Mr Payne the Judge dismissed the application. Mr Payne applied for a recall, as he had not referred the Judge to s 71 of

the Electoral Act,1 and as he had received some legal advice from a member of the

Law Faculty of the University of Otago. Again according to Mr Payne, the Judge then granted the injunction. Apparently, by that point, the closing date for naming the candidate for the Selwyn Electorate was looming and counsel for the National Party applied to have the injunction set aside so the candidate selection process could continue and be completed in time for the deadline to be met. Mr Payne says the Judge lifted the injunction to allow the selection process to continue and indicated that a substantive hearing on the application could be convened. The Court was unable to allocate a date for a substantive hearing before the election. Mr Payne told me that his application had been made on the ground of public interest as the party had not stated the reason it had twice rejected his application to be considered for nomination.

[14] It seems the National Party applied for costs and an order for costs was made in its favour in the sum which is now the subject of the bankruptcy notice.

[15] After taking further advice from a representative of the University of Otago

Law Faculty Mr Payne then decided that the appropriate way to continue his challenge to all that had happened was by way of an electoral petition. He filed

1. This section requires a political party to ensure that certain persons participate in the process of selection of candidates to represent the party to an election.

papers accordingly. He believed that he would have the costs award reconsidered in the context of that application. He told me that he had previously filed an appeal against the order, but had received a Minute from the Court of Appeal, which he accepted was correct, saying that the costs order could not be considered until the case in the High Court had been concluded.

[16] The proceeding under the Electoral Act was duly held, and was decided against Mr Payne by three Judges of the High Court. I understand that during that process Mr Payne learnt for the first time that the reason his nominations had been rejected was that he had been bankrupted. He says this was one reason the application failed. Counsel for the National Party told me that the reason the application by Mr Payne was unsuccessful was that the Court found that it did not have jurisdiction in relation to the issues raised by Mr Payne, as he was not a candidate for election, only a person who had sought nomination. His dispute with the National Party was outside the terms of the jurisdiction given by the Electoral Act.

[17] Mr Payne was ordered to pay costs on that proceeding, and the award of costs by this Court on his injunction proceedings remained owing.

[18] Mr Payne formed the view, as a result, that his character had been besmirched by a reference in the judgment to the fact that he had been bankrupt. Although that was accurate, I am satisfied he genuinely felt a sense of grievance. He had been bankrupt for just three and a half weeks and the bankruptcy had been annulled. By that point, costs he had been ordered to pay totalled some $24,000.

[19] Mr Payne told me that he then filed an application for judicial review of what he described as “the court issues” but the application was not described in any more detail to me. He told me he wanted a chance to show how he had been treated unfairly, as he saw it, not only on the matters that I have described but also on earlier issues relating to his property in Wellington, which in this judgment I need not relate. Mr Payne also maintained his view that he had acted throughout in the public interest and should not be personally liable for costs. No one, he said, apart from the public would have gained. When I asked him whether achieving the nomination for

Selwyn might not have been regarded as in his interest, he told me that by the time he took proceedings any prospect of being nominated was well and truly over. Whether that means that his litigation was in the public interest, however, is not clear, and I make no finding on it. In the end it is Mr Payne’s overall sense of unfairness in the way all these matters have worked out, and his view that he has at all times acted in the public interest, not his own, that underscores his extreme reluctance, indeed refusal, to pay the costs awarded against him by this Court.

[20] Mr Payne told me that he intends to file proceedings in defamation against the National Party in relation to statements made by the National Party relating to his bankruptcy. Those proceedings have not been filed; no further details of Mr Payne’s intentions are known, and no account can be taken of this.

[21] I also understand that Mr Payne has proceedings in the Wellington High Court relating to the issues with sale of his home, dating back some years. Again, apart from noting that Mr Payne believes this will release some funds to him when resolved, it is not of present relevance.

Review of adjudication in bankruptcy

[22] Although r 11.9 permits a Judge to recall a judgment prior to it being sealed, this does not apply to an adjudication in bankruptcy. It is well established that an adjudication cannot be rescinded.2 In Re Byron, Tompkins J said:

In my view, s 9(e) in spite of its wide and far reaching character does not give power to rescind an order of adjudication. The rescission of an order of adjudication is quite different from reviewing an order dismissing a petition, or revoking an order of discharge. In the first case the bankrupt’s property has been transferred to the Official Assignee, rights of creditors against the bankrupt have been restricted, and there has been a change in the status of the debtor. In the second and third cases the property of the bankrupt has not been affected by being vested in any other person, and rights of creditors have not been restricted. My view as to this is reinforced by the terms of s

136(1) which gives a special power to the Court to annul an adjudication where the order ought not to have been made ... . It is in my opinion the

2 Re Byron (a debtor) ex parte Commissioner of Inland Revenue [1964] NZLR 508

Re Guest ex parte BNZ Finance Ltd [1991] 1 NZLR 250

Holdgate v Campin HC Auckland B1545/96, 17 December 1997, Master Gambrill

Re Hunter HC Auckland B515-IM99, Robertson J, June 2000

appropriate and only power to be invoked where an order of adjudication should not have been made for any reason.

[23] Although s 9 is not replicated by an equivalent section in the Insolvency Act

2006, the principle enunciated by Tompkins J remains valid. As under the earlier Act, the property of a bankrupt is transferred to the Official Assignee (s 64(1)(e)) the rights of creditors are restricted (s 64(1)(d)) and there is a change of status of the debtor, whose affairs pass to the control of the Official Assignee and are thence governed by the statutory regime set out in the Insolvency Act 2006.

[24] Reference may be made to the commentary in Brookers Insolvency Law and Practice, at paragraph IN309.01. The principle established by these cases is invariably followed by this Court.

[25] Mr Payne endeavoured to draw a distinction between the term used in Re Hunter, rescission of the adjudication, and the word “recall” used in r 11.9. He did not elaborate on his suggestion that the words had different meanings. Although I accept that the words do not mean precisely the same, the principle underlying the cases remains valid, and is fully explained in the judgments in Re Byron and in Re Hunter, where a number of other authorities to similar effect are also referred to.

[26] During the hearing I explained to Mr Payne, though it became readily apparent that he needed no explanation, that he had avenues for remedy available to him at the time of the adjudication either by way of appeal to the Court of Appeal, within the statutory time limits, or by way of application for annulment (which he had made in 2005) or by way of an application for a discharge. Mr Payne explained to me that he had elected to file the present application because he believed this would have the most rapid result. He was most concerned to avoid a further period of bankruptcy, as he had experienced in 2005, with the results that I have outlined. However, s 55 of the Insolvency Act 2006 provides that bankruptcy commences on the date and at the time when the debtor is adjudicated bankrupt, and s 56 provides that if the debtor is adjudicated bankrupt on a creditor’s application (as here) the date of adjudication is the date and time when the Court makes the order of adjudication. It follows therefore that Mr Payne has been bankrupt since the order was made in September. Although his wish to have the position resolved promptly is

understandable, proceeding in a way which does not have a legal basis, will not bring about that end.

Outcome

[27] The application made by Mr Payne, which has been treated as an application to recall the judgment by which he was adjudicated bankrupt, is dismissed.

[28] The creditor, as respondent, is entitled to costs. Mr Forman indicated that he sought costs on a solicitor/client basis, but did not produce any financial information in support of that request. I direct that Mr Payne and the respondent are to file memoranda in relation to costs. In each case, the memorandum must not exceed three pages in length, excluding the title page and excluding any schedule by way of calculation of costs which may be attached. Memoranda in excess of this length may not be filed. These are to be filed by 25 January 2013. I will adjudicate on costs, on the papers, in the week of 28 January 2013.

[29] As indicated at the hearing I have referred the file to Fogarty J to consider the order he made preventing sealing of the adjudication order.

J G Matthews

_{Associate Judge}

Solicitors:

RSM Law, PO Box 557, Timaru.

Mr R J Payne, C/- Willowbank Farm, 73 Muff Road, Orari RD 26, Temuka.