McLEAN v THE NEW ZEALAND INSOLVENCY AND TRUSTEE SERVICE, AS OFFICIAL ASSIGNEE IN THE BANKRUPTCY OF THE PROPERTY OF ROBERT RITCHIE MARSHALL [2020] NZCA 642 [14 December 2020]

McLEAN v THE NEW ZEALAND INSOLVENCY AND TRUSTEE SERVICE, AS OFFICIAL ASSIGNEE INTHE BANKRUPTCY OF THE PROPERTY OF ROBERT RITCHIE MARSHALL [2020] NZCA 642[14 December 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA301/2020[2020] NZCA 642BETWEEN DOUGLAS WAYNE FRASER McLEANApplicantAND THE NEW ZEALAND INSOLVENCYAND TRUSTEE SERVICE, AS OFFICIALASSIGNEE IN THE BANKRUPTCY OFTHE PROPERTY OF ROBERT RITCHIEMARSHALLRespondentCourt: Brown and Gilbert JJCounsel: Applicant in personS D Munroe and R A Woods for RespondentJudgment:(On the papers)14 December 2020 at 11.00 amJUDGMENT OF THE COURTThe application for an extension of time to appeal is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Brown J)Introduction[1] Mr McLean filed an appeal in the High Court under s 226 of the InsolvencyAct 2006 concerning the administration by the New Zealand Insolvency and TrusteeService (the respondent) of the estate of a bankrupt who was significantly indebted toMr McLean. His appeal was dismissed on account of his failure to comply with anorder to pay security for costs. He did not file an appeal within the prescribed period.His application to this Court for leave to bring an appeal out of time under r 29A ofthe Court of Appeal (Civil) Rules 2005 filed on 8 June 2020 and amended on7 September 2020 was not served on the respondent until 14 September 2020.The application is opposed by the respondent.Relevant background[2] Mr McLean was a creditor of the bankrupt estate of a person adjudicatedbankrupt on 30 August 2016 and discharged on 30 August 2019. He was the mostsignificant creditor consequent upon lengthy litigation in which he obtained a seriesof judgments against the bankrupt between 2014 and 2016.[3] During the administration of the estate the respondent had cause to believe thebankrupt had made a series of potentially insolvent gifts involving the bankrupt'sfamily trust (the Trust). Upon receipt of a settlement offer from the Trust, therespondent voluntarily consulted with Mr McLean about the offer, inviting him toprovide funding if he wished litigation to be brought against the Trust. Mr McLeandid not agree to provide the necessary funding. On 18 March 2019 the settlement offermade by the Trust was accepted on a conditional basis, namely that the respondentrecorded the settlement was subject to a right of appeal under s 226 of the InsolvencyAct and would therefore be conditional for 15 working days until the time had expiredfor Mr McLean to appeal.[4] On 9 August 2019 Mr McLean filed his appeal under s 226 but did not servethe respondent until 10 September 2019. He sought a waiver of security for costs onthe grounds that he was unable to pay security and that his appeal involveda significant issue of public interest.[5] Following a telephone conference on 11 November 2019, in a minute dated15 November 2019 (the first minute) Powell J ruled that it was not possible to concludethat the merits of the appeal favoured the waiver of security.1 The Judge directed that1 McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460,15 November 2019 (Minute No 1).security for costs was to be paid by Mr McLean in the sum of $2,350 by29 November 2019, failing which the appeal would stand dismissed.[6] Mr McLean filed a memorandum in response to the first minute, proposing thatsecurity be provided in the form of his motor vehicle rather than by a money payment.In a second minute dated 25 November 2019 Powell J directed that security remainedpayable but that the respondent was to advise if it was prepared to take security overMr McLean's motor vehicle in lieu of payment of security.2 The respondent declinedto accept that proposal.[7] The issue of security was revisited again in a third minute dated3 December 2019.3 Relevantly the minute stated:[2] Following the second minute, Mr McLean emailed the Registryseeking details of the account that the security was to be paid into.Unfortunately Mr McLean's query was not able to be addressed until afterthe last date for payment of security had passed. In the meantime however,seeking to preserve his position Mr McLean arranged to pay the securityordered into his solicitor's trust account, which he did prior to the expiry ofthe deadline.[4] The nature of the direction issued on 15 November 2019 is that unlessthe direction was complied with the appeal is dismissed from the datespecified. As a result, as security was not in fact paid as directed, the appealwas therefore dismissed from the point of non-payment.[5] In this case however it is clear there was a supervening circumstance,namely Mr McLean's query to the Registry as to the mechanics of payingthe security into Court, and in the absence of a reply, the payment made toMr McLean's solicitors. Accordingly, given those circumstances, whilethe appeal was dismissed, I am satisfied that the interests of justice require theappeal to be reinstated subject to Mr McLean taking immediate steps tocomplete payment of security into Court.[8] The Judge made orders reinstating Mr McLean's appeal and directing thatsecurity in the sum of $2,350 was to be paid into Court by Mr McLean on or before6 December 2019. In the event that security was not paid by that date, the appealwould stand dismissed.2 McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460,25 November 2019 (Minute No 2).3 McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460,3 December 2019 (Minute No 3).[9] Mr McLean did not pay security for costs by 6 December 2019.On 8 December 2019 he filed a memorandum which was referred to by Powell J inhis fourth minute dated 11 December 2019 as follows:4[2] I am now in receipt of a memorandum received from Mr McLean.Mr McLean advises the Court that he has chosen not to pay security bythe date specified. He has explained that the reason he did not do so was thathe was unable to get an assurance that the security would be repaid in full, ifhe chose not to proceed with his appeal after the Official Assignee had filedand served its evidence in relation to the relevant decisions that it made, whichwas due to be filed on 13 December 2019.The Judge then commented:[4] With respect to Mr McLean, it was not possible for the Registry staffto provide him with any assurance that security for costs on the appeal, oncepaid, would be returned in full at any point. The reason for this is thatthe Official Assignee has no doubt already incurred costs on this appeal andfurther costs would inevitably be incurred in the production of the OfficialAssignee's evidence. As a result, any subsequent decision by Mr McLean todiscontinue the appeal after the filing of the Official Assignee's evidencewould be subject to any application for costs made by the Official Assigneeagainst the security already paid.[10] The minute recorded that Mr McLean's appeal was dismissed as from7 December 2019 and indicated the preliminary view that costs on the appeal shouldlie where they fell.[11] On 11 March 2020 Mr McLean filed an application for judicial review in theHigh Court at Auckland citing "the Crown, the Auckland High Court" as respondent.In a minute dated 12 May 2020 Palmer J dismissed the proceeding for the reason thatdecisions of the High Court cannot be subject to judicial review in the High Court. Heexplained that the appropriate course of action if a litigant disagrees with a High Courtdecision is for the litigant to appeal the decision.The application for an extension of time to appeal[12] By this point the time for appealing the dismissal of the s 226 appeal hadexpired. On 8 June 2020 the applicant filed in this Court an application for leave to4 McLean v The New Zealand Insolvency and Trustee Service HC Auckland CIV-2019-485-460,11 December 2019 (Minute No 4).bring an appeal out of time naming "the Crown, Auckland High Court" as respondent.In a minute dated 2 September 2020 Mr McLean was directed to file an amendedapplication naming as the correct respondent the New Zealand Insolvency and TrusteeService. An amended application was filed on 7 September 2020 which was servedon the respondent on 14 September 2020.[13] The amended application specifically relates to an appeal against the fourthminute recording that the s 226 appeal was dismissed. By implication, we take it asan application to appeal the directions in the third minute under which the appeal wasdismissed.[14] In his amended application for an extension of time to appeal Mr McLeandetailed his criticisms of the High Court direction to pay security for costs, allegingerror by the Judge in failing to give any credence to the asserted public interest and toaccept his criticisms of the respondent for its alleged breaches of its obligations.Mr McLean alleged that the Court did not act fairly or equitably and displayed littleempathy to him, noting that he had been seeking justice for some seven years. He alsoexplained the delay as arising from the erroneous procedural steps which he took asrecited above.[15] In addition to the amended application this Court has received and consideredthe following documents:- memorandum of counsel for the respondent in opposition filed5 October 2020;- affidavit of R G McDonald on behalf of the respondent dated5 October 2020;- memorandum of Mr McLean in support of application filed on21 October 2020;- memorandum of Mr McLean filed on 12 November 2020; and- submissions of counsel for the respondent filed on 13 November 2020.Mr McLean suggested that he should be afforded the opportunity to file fresh evidencein response to Mr McDonald's affidavit. However that affidavit primarily recited theprocedural history, filling the void in Mr McLean's application. We do not considerthat further evidence is required on the question for determination on the presentapplication.Relevant principles[16] The principles applicable to applications for extensions of time under r 29Awere explained by the Supreme Court in Almond v Read.5 The ultimate question whenconsidering the exercise of the discretion is what the interests of justice require.Factors identified as likely to require consideration include:6(a) the length of delay;(b) the reasons for delay;(c) the conduct of the parties, particularly the applicant;(d) any prejudice or hardship to the respondent or to others witha legitimate interest in the outcome; and(e) the significance of the issues raised by the proposed appeal, both forthe parties and more generally.[17] While the Court recognised that the merits of a proposed appeal may, inprinciple, be relevant for the exercise of the discretion to extend time, a decision torefuse an extension of time based substantially on that ground should be made onlywhere the appeal is clearly hopeless. The lack of merit must be readily apparent.75 Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.6 At [38].7 At [39].Discussion[18] Mr McLean's delay in filing the application for an extension of time to appealis significant. It was compounded by the fact that the application did not name theappropriate party as respondent. Hence the respondent did not become aware of theintended application until approximately nine months after the appeal to theHigh Court was dismissed.[19] In substantial part the delay has occurred because Mr McLean has proceededwithout the benefit of legal advice and, in consequence, has made a number ofprocedural errors. The respondent responsibly does not take issue with the delayattributable to the error in seeking to challenge the security for costs decision by wayof a judicial review proceeding in the High Court. However it does take issue withthe 28 working day delay between the time for filing an appeal and the date on whichthe judicial review application was filed. It observes that a further 18 working dayselapsed after the judicial review application was struck out before Mr McLean filedhis initial extension of time application.[20] While some allowance must be made to Mr McLean as a lay litigant, the errorsin filing a judicial review application and in failing to name (and hence serve) thecorrect respondent in the extension application were fundamental errors whichresulted in several months elapsing.[21] The respondent contends that Mr McLean's conduct is relevant, noting hishistory of delay, particularly in the context of the s 226 appeal. The various complaintsmade by Mr McLean throughout the administration of the estate culminated in therespondent voluntarily commissioning an external review by an independent barristerwhich confirmed that the decision to accept a settlement was commercially sensible.[22] The length of the delay and the conduct of Mr McLean have implications inthis case for the prejudice which would be suffered by the respondent if an extensionof time to appeal was granted. In Almond v Read the Supreme Court observed that thegreater the prejudice, the stronger the case will need to be to justify the grant of anextension of time. It stated that where there is significant delay coupled withsignificant prejudice, then it may well be appropriate to refuse leave even though theappeal appears to be strongly arguable.8[23] The respondent emphasises that it proceeded to administer the estate on thebasis that the s 226 appeal was dismissed. This included fully and finally settling theclaim against the Trust and closing the estate. The bankrupt has been discharged andthere are no further assets to be recovered in the estate. The point is made that theseacts, undertaken in reliance on the absence of any appeal, involve third parties andcannot be unwound. It is also observed that Mr McLean's financial hardship stemsfrom his business dealings with the bankrupt, not from the actions of the respondent.[24] Mr McLean maintains that there would be a considerable public interest formany other persons if findings were made that the respondent had "abused", "misled","failed to account", "reneged from undertakings", and failed to abide bythe State Services Commission Code of Conduct. However we agree with therespondent's submission that Mr McLean's criticisms of the administration of theparticular bankrupt estate do not elevate the case to one of public interest. Rather theissues raised by Mr McLean are private concerns primarily affecting him as the mostsignificant creditor in the estate. The proposed appeal does not appear to raise anydiscernible question of law. By contrast, as the respondent submits, there isa significant public interest in ensuring the efficient administration of bankrupt estatesand in providing finality in litigation.[25] The respondent also submits that the proposed grounds of appeal are hopelessand cannot possibly succeed. However as noted above the Supreme Court made itclear that the decision to refuse an extension of time substantially on the ground oflack of merit of a proposed appeal should be made only where the appeal is clearlyhopeless. Nevertheless it is relevant in the present case to make some assessment ofthe strength of the proposed appeal in weighing the significance of prejudice to therespondent as a factor.[26] On an appeal to the High Court it is mandatory to order security for costs underr 20.13(2) of the High Court Rules 2016 unless the Judge considers that it is in the8 At [38(d)].interests of justice that no security be required. We do not consider that there was anydemonstrable error on the part of the Judge in considering that issue. Furthermore itis apparent that Mr McLean was in a position to pay security. Indeed as noted at[7] above the fact that he had paid the amount of security into his solicitor's trustaccount was the reason why Powell J reinstated his appeal. In order to avoid the riskof the security being called on, Mr McLean then made a conscious decision not tocomply with the Judge's direction.[27] Weighing these several factors, recognising the delay having been causedsubstantially by procedural mis-steps by a self-represented litigant but alsoacknowledging the clear prejudice for the respondent consequent on an extension oftime to appeal at this juncture, we conclude that it is inappropriate to grant an extensionof time to appeal in the present case.Result[28] The application for an extension of time to appeal is dismissed.Solicitors:Anderson Lloyd, Christchurch for Respondent