Whitfield Braun Limited v Fawcett [2016] NZHC 2926 (7 December 2016)

Last Updated: 15 December 2016

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-419-135 [2016] NZHC 2926

BETWEEN	WHITFIELD BRAUN LIMITED Judgment Creditor
AND	CHRISTOPHER LOUIS FAWCETT Judgment Debtor

Hearing:	30 November 2016
Appearances:	Mr T Braun for Judgment Creditor Mr Fawcett Judgment debtor in person
Judgment:	7 December 2016

_{JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE}

This judgment was delivered by me on

7.12.16 at 3.30 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

WHITFIELD BRAUN LIMITED v FAWCETT [2016] NZHC 2926 [7 December 2016]

[1] The judgment creditor was retained by the judgment debtor to provide legal services. It invoiced the judgment debtor for those services after they had been performed.

[2] A dispute then arose as to payment of the fees which the judgment creditor had invoiced. There were exchanges by way of face to face discussions and through emails. The judgment creditor commenced proceedings before the Disputes Tribunal (apparently in 2015) for an order for payment of the legal fees.

[3] In the course of at least one of the Dispute Tribunal hearings, the parties, apparently in the presence of the disputes referee, engaged in settlement discussions. In the course of those discussions, the judgment creditor put forward a suggestion that it would accept an arrangement whereby the judgment debtor would pay off the debt in seven $500 monthly instalments with the first payment on 20 February 2016. It would appear that no agreement was actually reached on the matter at the Disputes Tribunal hearing.

[4] On 16 February 2016 the detail of a proposal to settle the outstanding amount of $3,500 was set out in an email that Mr Braun, a director of the judgment creditor, sent to the judgment debtor.

[5] The terms of that offer were set out in two emails of 16 February, the first of which was in the following terms:

Kit

You asked for the terms on which settlement was proposed today. You will recall that we had some discussion about settlement, and eventually you offered to settle for payment of $3,500 from you to us on the following terms (although later you seemed to back away from that figure):

- $3,500 payable in seven $500 monthly instalments on the 20^th of each month with the first payment on 20 February 2016.

- In full and final settlement of all issues between you and this firm.

- We will copy your file at no cost to you, and will provide the original documents we hold to you within seven days of the first payment being made.

- If you miss any payment, the full amount claimed by us of $4,180.87, plus any accrued interest at the rate of $1.62 per day, less any payments made by you to that time becomes immediately due and payable by you in full, and can be recovered from you as a debt in the District Court.

- We will ask the Disputes Tribunal to record this as a binding decision.

We are willing to propose this as a settlement offer for you to consider. The offer will remain open until 12 pm this Friday, 19 February 2016 at which time it will be withdrawn. We will not consider a lesser settlement amount – this really is a take it or leave it offer. Take it and this matter comes to an end; leave it and we are back to the Tribunal. Ths involves substantial compromise on our part, and is less than we consider we would be awarded if the Tribunal were to make a determination. And we note that any determination would be payable, in full, within one to three weeks.

Please let me know whether this offer is accepted by you.

[6] It will be apparent that the email that Mr Braun sent was not by way of confirmation of an agreement that had already been entered into. The email contained an offer to settle. The offer was open until 12 p.m. on Friday, 19 February

2016 at which time it would be withdrawn. There was no dispute concerning this feature of the offer and it is clear that the intention was that the offer would lapse if not accepted by the time and date stipulated.

[7] The judgment debtor replied that he was out of town until Friday and that he would respond then. Shortly after the first email that Mr Braun sent he followed it with a further email which modified the arrangement by saying:

Offer open until 12 p.m. Friday and first payment would need to be made that day.

[8] There is no evidence that the offer was accepted within the time limit set out.

[9] The hearing before the Disputes Tribunal resumed and resulted in the award being made on 22 March 2016. The award did not contemplate a deferred or scheduled payment arrangement, requiring the judgment debtor to pay the sum of

$4,237.90 which was made up of the outstanding invoiced fees of $3,950.68 together with interest.

[10] In the meantime the judgment debtor started making payments of $10 per

_{week, later increasing these to $500 per month. The following payments were made:}

14 March 2016-11 April 2016 five weekly payments of $10	$50
20 April 2016	$500
20 May 2016	$500
20 June 2016	$500
20 July 2016	$500
19 August 2016	$2197.90

[11] The position following the issue of the Disputes Tribunal decision was that the judgment debtor had a present liability to pay that amount. There is no indication on the face of the award of the Disputes Tribunal that the argument was even raised that the judgment creditor was bound to accept a deferred payment arrangement.

[12] Because payment of the entire amount owing under the Disputes Tribunal order was not received, the judgment creditor obtained a bankruptcy notice in April

2016 which was served on the judgment debtor on 16 May 2016.

[13] On 30 May 2016 the judgment debtor filed an “interlocutory application” seeking a direction by the Court that he was able to pay the judgment debtor $500 per month until the debt was paid. The grounds included an assertion:

(a) That the judgment creditor is currently been paid monthly.

(b) That the judgment creditor has agreed in principle to this plan. (c) That this monthly amount is all the judgment debtor can afford.

[14] Eventually on completion of the payments referred to at [10], the amount of

$3,737.90 which was claimed in the bankruptcy notice was paid off in full.

[15] The judgment creditor then indicated that it would not take the bankruptcy proceedings any further but it expected to be paid for costs on the bankruptcy notice. It advised the judgment debtor of its intention to seek the costs on the bankruptcy notice but not to be concerned about the matter of the costs on the interlocutory application that he had filed relating to the bankruptcy notice. However, the

judgment debtor would not accept liability for costs and wished the costs generally to be decided by the court.

[16] The case was adjourned to 30 November 2016 so that the question of costs could be determined.

[17] The interlocutory application which I have referred to above was never determined by the court because, the payments having been completed, the judgment debtor advised of his intention to withdraw the application.

[18] The questions that arise in this case include whether a proceeding relevantly came into existence and whether the court had power to make costs orders.

Accord and satisfaction

[19] In the course of the submissions which the judgment debtor made, it became clear that the basis of the judgment debtor’s opposition to the making of a costs order is based upon the ground that he had come to a binding agreement with the judgment creditor to pay off the amount by a series of payments and that he had in fact adhered to that arrangement, so that there was no justification for the judgment creditor obtaining and serving a bankruptcy notice. Those contentions would seem to be based on the supposition that the court has a discretionary power to award costs and that because the judgment creditor has received everything that it was entitled to under the accord and satisfaction, no costs award ought to be made.

[20] Following the Disputes Tribunal hearing, the judgment debtor raised the question of a deferred payment arrangement in the following email which he sent to the judgment creditor on 10 April 2016:

Toby, amend the settlement terms to include full amount and send through a copy for me to sign and you will get payment on the 20^th as per the agreement, thanks Kit.

[21] Mr Braun replied:

Kit,

Your fundamental difficulty is that there is no agreement. I made an offer to you before the final hearing, which you rejected. Instead, there is a decision from the Tribunal that you owe us $4237.90 and this was due to be paid on 5

April. You are now in default of this order. I am not prepared to wait nine months for payment. A better proposal will need to be made, or else we will

commence bankruptcy proceedings. Any such proposal would need to

include payment of a minimum of $1000 by the end of this week, with further regular payments that would see the full amount paid within three

months. Are you able to structure this?

[22] The following day, the judgment debtor emailed:

yes toby but I can only pay $500/month as I don’t have sufficient funds in NZ and they are offshore, as I have indicated, first payment next wed week of $500 [20^th], thanks Kit.

[23] This exchange of emails completed with the following communication from

Mr Braun to the judgment debtor on 12 April 2016:

Kit

You pay as much as you can and we’ll consider what steps we need to take.

[24] I will set out my conclusions on the accord and satisfaction in the next section of this judgment.

Discussion

[25] The judgment debtor was of the view that there were aspects of the dealings between the parties which disentitled the judgment creditor to seek costs on the bankruptcy notice.

[26] In part, these contentions which the judgment debtor put forward had to do with the merits of the original claim which was a debt that he had incurred as a result of instructing the judgment creditor to provide legal services. I do not intend to examine the complaints that the judgment debtor makes because all of those issues were explored at the hearing before the Disputes Tribunal which concluded that the judgment debtor in fact owed the amount claimed.

[27] A second aspect of the contentions that the judgment debtor put forward concerned the negotiations and in particular the view that the parties might have entered into an accord and satisfaction. While the detailed reasoning was not spelled

out, I understand the position of the judgment debtor to be that, notwithstanding the fact that the Disputes Tribunal had made an award in favour of the judgment creditor, that party had in fact entered into a subsequent compromise of its position with the judgment debtor, and that the judgment debtor had performed his part of the subsequent arrangements but the judgment creditor had not.

[28] I do not consider that there was a binding arrangement entered into. It is correct that the judgment creditor initially was prepared to offer a staged payment arrangement but the offer that it made clearly lapsed without it being accepted. Thereafter the judgment creditor apparently resolved to enforce the full amount of its claim against the judgment debtor and for that reason continued the proceeding in the Disputes Tribunal. Subsequently when the judgment debtor attempted to revive the settlement proposal, the judgment creditor pointed out that there had never been any agreement. That in my view was a correct position to take. It would appear that the judgment debtor had an opportunity to make an arrangement involving the payment of $500 per month but did not comply with the terms of the proposal so that no concluded arrangement ever came into effect.

[29] The judgment debtor told me that it would have been obvious to the judgment creditor that he could not afford to pay off the liability in one lump sum and that he would be required to meet the debt by way of instalment payments. In my assessment that is not a relevant consideration to whether or not the court ought to make an award of costs on the bankruptcy notice. It really amounts to an argument that the judgment debtor was insolvent and could not pay his debts as they fell due. It is in exactly those circumstances that creditors generally have recourse to the bankruptcy arrangements. It is no answer for a judgment debtor to say that it is a misuse of the bankruptcy notice procedure to serve such a notice in circumstances where it knows that the judgment debtor could not meet the liability when it fell due.

[30] The other matter is the statement which Mr Braun made in the email that he wrote on 12 April 2016, telling the judgment debtor to pay as much as he could and “we’ll consider what steps we need to take”. I have considered whether that statement of position on the part of the judgment creditor could possibly be viewed as the foundation for an estoppel or something of that kind but have concluded that it

could not. On its face, the statement makes it clear that the judgment creditor expected the judgment debtor to make reductions of the debt and that he should continue to do that while the judgment creditor considered its position. That does not amount to an unequivocal statement to the effect that any obligation to make payments by the judgment debtor was suspended.

[31] For all of those reasons I consider that the judgment debtor has no legitimate complaint about the approach that the judgment creditor took in regard to the issue of the bankruptcy notice. The judgment creditor was owed a debt and it was entitled to takes steps to enforce enforcement steps for payment of that debt unless there was some aspect of its conduct which disentitled it to take that step. I am not able to agree with the judgment debtor that there was any obstacle or hindrance in the way of the judgment creditor.

[32] The above conclusions do not, though, amount to a determination that a costs order is available to the judgment creditor. That is the next issue that I shall consider.

[33] The present position is a procedural curiosity in that no court proceeding has ever been issued. As a matter of Registry practice a file was constituted for the purpose of registering and filing documents deposited with the court as part of the process of issuing a bankruptcy notice. The records kept on that file indicate the fact of the issue of a bankruptcy notice and the provision of a sealed copy to the judgment creditor to serve upon the judgment debtor.

[34] It is correct that the judgment debtor purported to file an interlocutory application referencing that document with the identification particulars of the file maintained in the Registry for the purpose of the bankruptcy notice. There would appear to have been no justification for him to do that or for the Registry to accept that application for filing.

[35] The court is entitled to make costs orders under pt 14 of the High Court Rules

2016 (“Rules”) where a proceeding is in existence. A “proceeding” is defined in the

rules as:¹

... any application to the court for the exercise of the civil jurisdiction of the court other than an interlocutory application[.]

[36] The lodging of a bankruptcy notice and a subsequent issue under seal does not constitute the establishment of a proceeding within the meaning of the above definition. Because there is no proceeding, it would not seem to be possible to make an order under pt 14.²

[37] Another possible source of jurisdiction is the section of the Rules dealing with insolvency, pt 24.

[38] There is a provision in the Rules prescribing the form of bankruptcy notice which is to be used,³ which authorises a debtor who disputes the claim for costs to apply within 14 working days to the High Court to fix costs of the bankruptcy notice. The judgment debtor in this case did not make such an application. While the form does not explicitly say so, it would seem that the 14 working days would begin to run from the point where the bankruptcy notice was served upon the debtor. No doubt, there is jurisdiction to extend that time but no application to that effect has been made in this case. However, there does not seem, either, to be any provision in

pt 24 for the court to make any affirmative pronunciation in the favour of the judgment creditor that the costs are owing.

[39] In summary, because of the definition of “proceeding” set out above, the pt

14 jurisdiction cannot be invoked to make an order for costs.

[40] What would appear to be the case is that because of the terms of the prescribed form for a bankruptcy notice, the consequences of not paying or not disputing the costs claimed in the bankruptcy notice are stated in the following

_terms:

¹ _{High Court Rules 2016, definition of “proceeding” in r 1.3.}

² _{Rule 14.1.}

³ Form B2.

If you do not pay the costs claimed or dispute the claim for costs, you will committ an act of bankruptcy for which you may be adjudicated bankrupt.

[41] There does not seem to be any other part of the Rules which makes provision for unpaid costs of a bankruptcy notice. That being so, I do not consider that there is any basis upon which the judgment creditor can claim costs relating to the bankruptcy notice.

[42] The final matter that I mention is not one that strictly speaking needs to be considered and that concerns the application for costs on the interlocutory application that the judgment debtor filed in the proceeding. In my assessment, the interlocutory application was a nullity because there was no proceeding as relevantly defined in the Rules to which the application could relate. However, it may have been possible, had an application been made for costs regarding that interlocutory application, to make an order based upon the inherent jurisdiction of the court. While the interlocutory application itself was a nullity, steps taken by a party to protect its position including, by having resort to the court for that purpose, may well justify an award of costs. But, as I say, no order for costs is sought under that heading.

[43] The result is that there will be no order for costs pursuant to the application which the judgment debtor has brought.

J.P. Doogue

Associate Judge