Southern Recon Limited v Siryj [2014] NZHC 1193 (30 May 2014)

Last Updated: 10 June 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-001597 [2014] NZHC 1193

IN THE MATTER OF	the Insolvency Act 2006
AND
IN THE MATTER OF	the proposed bankruptcy of Steve Siryj
BETWEEN	SOUTHERN RECON LIMITED Judgment Creditor
AND	STEPHAN JAROSLAW SIRYJ Judgment Debtor

Hearing:	29 May 2014
Appearances:	S J Caradus for Creditor G A Cooper for Debtor
Judgment:	30 May 2014

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

_{as to costs}

[1] The creditor applies for the costs of an application for an adjudication order which has been dismissed. The debtor opposes any award of costs and submits that he should have the costs of opposing the costs application.

Background

[2] The creditor obtained an order of the Tenancy Tribunal in August 2013 requiring the debtor to pay $31,266.28 (“the debt”) to the creditor.

[3] The creditor served a bankruptcy notice in relation to the debt on 23

_{December 2013.}

SOUTHERN RECON LIMITED v SIRYJ [2014] NZHC 1193 [30 May 2014]

[4] When the debtor still did not pay the debt, the creditor made application for an adjudication order on 20 March 2014, for hearing on 1 May 2014.

[5] On 27 April 2014, the debtor submitted an application for a formal Summary Instalment Order to the Official Assignee, having approached the Community Law Centre for assistance the previous day.

[6] It was going to take the Insolvency Administrator’s office some further time to process the Summary Instalment Order so the present proceeding was initially adjourned.

[7] A Summary Instalment Order was made on 20 May 2014 in relation to the debt. The Summary Instalment Order does not encompass any costs in relation to this proceeding.

[8] The creditor accepted that the application for an adjudication order must now be dismissed but pursues costs.

The costs jurisdiction

[9] Section 41 Insolvency Act 2006 applies where a debtor applies for a

Summary Instalment Order.¹

[10] The Court is empowered by s 41(3) of the Act to make any order as to costs that the Court thinks appropriate.

[11] Section 41 of the Act thus reinforces the Court’s discretion as to costs under

Part 14 High Court Rules.

Competing positions

The creditor’s claim

[12] For the creditor, it is submitted that the creditor proceeded properly in issuing a bankruptcy notice and then, when payment of the debt was still not made, filing its

¹ S 41(1)(c) Insolvency Act 2006.

application. It is submitted that the debtor’s subsequent, successful application for a Summary Instalment Order does not cut across the propriety of the creditor’s proceeding. The creditor suggests that it is clear that, but for the pursuit of bankruptcy proceedings, the debtor would not have made the arrangements that are now encapsulated in the Summary Instalment Order.

Debtor’s submissions

[13] For the debtor, Mr Cooper submitted that the application for bankruptcy was in the circumstances unreasonable, unnecessary and a waste of costs, which ought to entitle the debtor to the award of some costs. Alternatively, Mr Cooper submits that if there is to be an award of costs the award should be on a 1A basis rather than on a

2B basis.

[14] Mr Cooper relies upon an affidavit of the debtor sworn 30 April 2014. Mr Siryj produces an email of 9 December 2013 in which he proposed repayment on the following terms:

(a) Monthly payment of not less than $1,000 commencing immediately

upon [creditor’s] concurrence until the debt is paid in full;

(b) Payment towards this debt of whatever sum may eventually be disbursed against [debtor’s] unsecured claim against the Mainzeal liquidators, upon receipt.

(c) If possible, the payment of all funds in [debtor’s] Kiwisaver accounts to [creditor], upon receipt.

[15] Mr Siryj deposed that he did not receive a response to that proposed repayment scheme and had no further contact from the creditor’s solicitors. Instead, the bankruptcy notice was issued on 23 December 2013.

Creditor’s response

[16] Rachael Chandra, a litigation solicitor employed by the creditor’s solicitors,

filed an affidavit in response.

[17] Miss Chandra explains that Mr Siryj’s 9 December 2013 proposal was received at a time when the creditor’s solicitors had been having difficulty effecting service of the bankruptcy notice (already issued) upon Mr Siryj.

[18] Miss Chandra deposes to telephone discussions which took place between her supervising partner (Chris Morris) and Mr Siryj following receipt of Mr Siryj’s email proposal. Miss Chandra was present when conversations were conducted on speaker phone. Miss Chandra deposes that Mr Morris explained that he wanted to gain an understanding of, amongst other things, the asset position of Mr Siryj and his current income levels so that the lawyers could discuss the options with their client. Mr Morris told Mr Siryj that the creditor was not likely to be interested in the offer given that it would take nearly three years to repay the debt on that proposal and no detail as to available security of assets had been provided. Mr Morris explained that the creditor would rather enforce the judgment. However Mr Morris added that if Mr Siryj could start making payments immediately (which Mr Siryj said he could) the creditor might more favourably consider the arrangement as there would be some confidence that payments would be made. Miss Chandra deposes that Mr Siryj agreed to start making payments of $1,000 a month directly to the creditor. She deposes that Mr Morris also asked Mr Siryj if he would email to the lawyers the statements relating to investment funds in the United States, which Mr Siryj said he had and that Mr Siryj agreed to do that by the following Friday.

[19] Miss Chandra deposes that Mr Siryj failed to make any payments or to provide the agreed statements.

[20] She therefore rejects Mr Siryj’s assertion that there had been no response to the 9 December proposal.

No further evidence

[21] The debtor did not file any further evidence.

[22] The thrust of Mr Cooper’s submission is that the creditor has not filed any evidence of a written response to the 9 December offer and that there appears to have been no agreement reached as to the debtor’s offer. He submits that it would have been unreasonable to expect the debtor to commence repayments without an agreement in place.

Discussion

[23] On the evidence as it stands the probabilities are:

(a) The creditor’s issuing of a bankruptcy notice in November 2013 was an appropriate step when the debtor had not taken steps to propose payment of the debt;

(b) The debtor’s 9 December 2013 emailed proposal was responded to by

the creditor through telephone calls from the creditor’s solicitor;

(c) The debtor would have thereby understood that his proposal was not being accepted but that the creditor might look upon the proposal more favourably if the debtor in any event commenced repayments at

$1,000 per month;

(d) The debtor did not commence any payments to the creditor nor did he provide certain information about his finances which he had agreed to provide;

(e) It was therefore appropriate for the creditor to commence an application for an adjudication order when it did so in March 2014.

[24] It was the entitlement of the debtor at any time to apply for a Summary Instalment Order. That he was successful on an application which he made after the creditor had filed its adjudication application does not cut across the appropriateness

of the creditor’s application at the time it was made. The creditor was also entitled, as counsel submits, to take the view when the summary instalment order application was made that the process involved with such an application involves some greater degree of vetting than was available to the creditor through the email and telephone exchanges that occurred between creditor and debtor in December 2013. As matters were left in December 2013, the steps which the creditor took in this proceeding were reasonable. Furthermore, when the debtor eventually applied for a Summary Instalment Order the creditor acted responsibly in its approach to adjournments of the proceeding pending the outcome of the Summary Instalment Order application.

[25] I am satisfied in these circumstances that the creditor is entitled to costs and disbursements.

[26] Mr Cooper submits that costs should be on a 1A basis because the documents filed were simple and straight-forward. I accept that there will be occasions when a bankruptcy proceeding may be so simple or straightforward that it is appropriate it be conducted by counsel considered junior in the High Court. However, bankruptcy proceedings are of an important nature going to the status of individuals. The key consideration under r 14.3(1) by which proceedings are categorised is as to the identity of the person who should appropriately conduct the proceeding (my emphasis). I am satisfied that this proceeding should appropriately be considered as of average complexity so as to attract conduct by counsel of average skill and experience in the High Court.

[27] The appropriate categorisation of the proceeding is Category 2.

Fixing of costs and disbursements

[28] Mr Morris, for the creditor, has filed a calculation of costs on a 2B basis which correctly totals $3,184. In addition, the recoverable disbursements total

$1,000. Those are the appropriate sums to award.

How the costs and disbursements should be paid

[29] Mr Morris informs me that the Summary Instalment Order was made in relation to the debt of $31,316.28 (the sum identified in the Certificate of Judgment provided by the District Court). Accordingly the amount of any costs and disbursements awarded by this Court will not automatically be the subject of the supervisor’s administration of the Summary Instalment Order.

[30] Pursuant to s 356(4) Insolvency Act, the creditor will be entitled to elect to have any additional costs order included in the administration of the debtor’s estate. That would appear to be the most straight-forward course for the creditor to pursue. Alternatively, should the creditor wish to recover the costs and disbursements other than through the debtor’s supervised estate, in my judgment an appropriate order as to costs and disbursements would be that they will become payable immediately the supervision of the debtor’s estate under his Summary Instalment Order comes to an end. The Summary Instalment Order proceeds for now upon the basis that the Assignee considers the debtor’s application workable. It would not be appropriate that an additional judgment debt (through the awarding of costs and disbursements now) should be allowed to prejudice the workability of a Summary Instalment Order that has been made.

Orders

[31] I order:

(a) The judgment debtor is to pay to the judgment creditor the costs and disbursements of this proceeding in a total sum of $4,184 (“the judgment debt”);

(b) In the event either the judgment creditor elects not to have this judgment debt included in the administration of the judgment debtor’s estate pursuant to s 356(4)(a) Insolvency Act 2006 or for any other reason the creditor is unable to recover this judgment debt through the supervision of the judgment debtor’s estate under the current Summary Instalment Order, this judgment debt shall become payable

to the judgment creditor on the day following the termination of the administration of the debtor’s estate under the Summary Instalment Order.

(c) In the event the judgment creditor elects to have this judgment debt included in the administration of the judgment debtor’s estate pursuant to s 356(4)(a) Insolvency Act 2006, the judgment debt is to be dealt with in terms of s 356(4)(b) Insolvency Act 2006.

Associate Judge Osborne

Solicitors:

Cook Morris Quinn, Auckland

Anderson Lloyd, Christchurch