Clayton v Clayton [2014] NZHC 3140 (9 December 2014)

Last Updated: 16 December 2014

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2014-463-000068 [2014] NZHC 3140

IN THE MATTER	of the Insolvency Act 2006
AND
IN THE MATTER	of the bankruptcy of MARK ARNOLD CLAYTON
BETWEEN	MELANIE ANN CLAYTON Judgment Creditor
AND	MARK ARNOLD CLAYTON Judgment Debtor

Hearing:	9 December 2014 (by AVL)
Appearances:	J R Hosking for Judgment Creditor J Gurnick for Judgment Debtor
Judgment:	9 December 2014

_{FINAL JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

This judgment was delivered by me at 4.30 pm on 9 December 2014 pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Lance Lawson, Rotorua. Tompkins Wake, Hamilton.

CLAYTON v CLAYTON [2014] NZHC 3140 [9 December 2014]

[1] Mr Clayton has paid all known due debts. There are no further concerns over his solvency. On the application of Mrs Hosking the application for adjudication is withdrawn by leave. The effective time for this withdrawal was 9.30 am today.

Costs

[2] Mrs Clayton applies for, and is entitled to, costs. There has been some debate on the issue of costs prior to now, resulting in the preparation of a list of attendances which is partially agreed.

[3] Having heard from both counsel I direct that the following steps will be the subject of an award of costs, together with the appropriate time allocations from the

_{Schedule to the High Court Rules for costs on a 2B basis.}

44	File and serving bankruptcy notice		0.2
45	Filing application for adjudication		0.6
46	Appearance at hearings:
	7 July	0.4
	11 September	1.0
	25 September	0.4
	14 October	0.4	2.2
24	Preparation of submissions:
	11 September	1.5
	25 September & 14 October	0.5	2.0

[4] I am satisfied that there should be a further allocation of 1.5 days for the preparation of the extensive affidavits required.

[5] This leads to a total of 6.5 days.

[6] I am further satisfied that there should be an allowance of 0.4 days for the appearance on 9 December. This will result in a total of 6.9 days. If this were the end of the matter, this would equate to an award of costs of $13,731.

[7] Mrs Hosking applies for an uplift in costs of 50 per cent. Mr Gurnick says that an uplift is not warranted.

[8] Rule 14.6 provides that increased costs may be ordered in certain circumstances. Two of those are where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding by taking or pursuing an unnecessary step, or an argument that lacks merit, and failing without reasonable justification to admit facts, evidence, documents or accept a legal argument.

[9] In my opinion both of these are relevant to the present case. First, Mr Clayton brought an application to set aside the bankruptcy notice, which did not cite the only statutory grounds available for the making of such an order. The application was fundamentally flawed and doomed to fail. It was filed by Mr Clayton’s former solicitor, but he must accept responsibility for the action as he instructed her to take this step, and Mrs Clayton has incurred additional cost as a consequence of it.

[10] Secondly, the position taken by Mr Clayton to his personal solvency was fortified by his filing an affidavit from his accountant, on which I have already made comment. In short, the accountant expressed his professional opinion that Mr Clayton was solvent based on a list of assets, but closer examination of the assets in the list showed that in the case of a large number of them, Mr Clayton was not the beneficial owner and in the case of one of them, the figure given referred to the assets of a company rather than to the value of its shares. This was particularly misleading given that evidence had been given on behalf of Mr Clayton, when he was endeavouring to minimise the value of relationship property, to the effect that the shares were valueless.

[11] There was sufficient material before the Court at all times for me to hold grave concerns as to Mr Clayton’s solvency. In short, he has elected to own little as beneficial owner, but to have access to very substantial assets through a network of trusts. In its bankruptcy jurisdiction this Court is concerned with solvency. It is very unhelpful if a person facing adjudication files evidence which, if not deliberately designed to throw the Court off the scent, certainly has the potential to have that effect.

[12] Presentation of Mr Clayton’s defence to this application on the basis of this stance on his personal solvency undoubtedly materially added to the length of time taken to resolve this application.

[13] Mrs Hosking informs me that although she cannot give the Court an exact figure, Mrs Clayton’s costs in relation to this application are approximately $30,000. An uplift of 50 per cent on scale costs, as sought, would result in Mrs Clayton being awarded costs in the sum of $20,596.50, which is approximately two-thirds of that sum. Costs on scale would fall short of even 50 per cent of the costs Mrs Clayton has incurred. Rule 14.2(d) provides that an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application. It is a reasonable inference from this principle that an award of costs at approximately two-thirds of the actual costs incurred by a litigant is not excessive.

[14] For these reasons I award costs to Mrs Clayton against Mr Clayton in the sum of $20,596.50 plus disbursements as fixed by the Registrar.

J G Matthews

Associate Judge