DEMARCO v OFFICIAL ASSIGNEE [2023] NZHC 1576

DEMARCO v OFFICIAL ASSIGNEE [2023] NZHC 1576 [23 June 2023]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2022-485-642[2023] NZHC 1576UNDER Section 226 of the Insolvency Act 2006ANDIN THE MATTER of an application to review the OfficialAssignee's decisionBETWEEN EUGENE JOHN DEMARCOApplicantAND THE OFFICIAL ASSIGNEE in bankruptcyof the property of Eugene John DeMarcoRespondentHearing: 19 June 2023Counsel: E J DeMarco in personR M G Hindriksen for RespondentJudgment: 23 June 2023JUDGMENT OF RADICH J[1] Eugene John DeMarco (Mr DeMarco),1 an undischarged bankrupt, has broughtthis appeal under s 226 of the Insolvency Act 2006 (the Act) from a decision of therespondent (the Official Assignee) in which Mr DeMarco's request for the OfficialAssignee's consent for him to travel to the United States of America was declined.[2] Mr DeMarco had purchased his airline ticket to travel to the United Statesbefore he sought the permission that was needed for him to travel from the Official1 Mr DeMarco seeks to draw a distinction between "Mr DeMarco" as a corporate form, on the onehand, and "a people who is called Eugene", on the other. For reasons I go on to give, the distinctionis not tenable and I refer in this decision to all aspects of the applicant as "Mr DeMarco".Assignee. He left New Zealand for the United States before the Official Assignee'sdecision was made. The decision was made and communicated just three days afterthe request was made.[3] Mr DeMarco has not complied with a number of timetable orders made by theCourt (and extended on several occasions to accommodate his interests) requiring himto file evidence in support of the appeal. The grounds for the appeal remain unknown.In these circumstances, the Official Assignee seeks security for costs and ordersstaying the proceeding until Mr DeMarco pays funds into the Court or gives securityin accordance with the Court's orders. It is that application with which this decisionis concerned.[4] Mr DeMarco raises a preliminary matter. He says that the Court does not havejurisdiction to consider the application – or the proceeding as a whole – becauseMr DeMarco is a legal fiction, a point I address in the next section of this decision.[5] I am in no doubt that the Court has jurisdiction in this proceeding and, inrelation to this application, that security for costs should be ordered and that theproceeding should be stayed.Protest to jurisdiction[6] Mr DeMarco has, in a memorandum of 10 June 2023, protested the Court'sjurisdiction. The challenge is based, it is said, in three documents which Mr DeMarcoregards as not having been refuted. Those documents are as follows:(a) a memorandum in response to a minute of Grice J, dated 25 April 2023;(b) the affidavit of DeMarco of 25 April 2023; and(c) the "proclamation of Eugene John of the DeMarco Family dated26 March 2023".[7] In the memorandum of 25 April 2023 it is said, amongst other things, that"Mr DeMarco is a person and a person is a legal fiction, a corporation, a creation ofthe state and merely a piece of paper" and that it is impossible, therefore, forMr DeMarco to make an application or to do any other thing.[8] A distinction is sought to be made between the corporate form of Mr DeMarco,as just described, and "the agent for the estate of Eugene John DeMarco, a people whois called Eugene". In Mr DeMarco's 25 April 2023 affidavit, it is said that, as a resultof these same points, the person who is living with "a call of Eugene" is exempt fromthese proceedings. It is said that the only Court with available sovereign jurisdictionis the People's Full High Court. It is said that this Court is in Huntly.[9] It is said that s 381(2) of the Criminal Procedure Act 2011 supports thissubmission. However, that provision has no application here. It applies in theconfined area of the payment of court fines and costs – directing that court orders aboutthe payment of costs that result from procedural errors override other enactments thatwould have given anyone protection from liability.[10] Mr DeMarco's "dual personality" or "split person" theory is sometimesreferred to as part of "pseudolaw", a term that refers to a phenomenon through whichlitigants deploy "a collection of legal-sounding but false rules that purport to be law".2Pseudolaw "mirrors and co-opts the language, forms and structures of legal reasoning,but it lacks the substantive engagement with core norms, principles and methods oflegal reasoning".3[11] Dual personality theories essentially contend that people have two separate anddistinct entities: a natural or corporeal form; and a fictitious, legal personality. Thetheory has been explained in these terms:4The basis of [the split-person argument] is that there are naturalindividuals and some sort of 'artificial', corporate or fictive legalpersonality. As mentioned above, adherents believe that every personis an individual sovereign. Because every person has inalienable,2 Stephen Young, Harry Hobbs and Joe McIntyre The growth of pseudolaw and sovereign citizensin Aotearoa New Zealand courts [2023] NZLJ 6 at 6, citing Donald Neteolitzky "A Rebellion ofFurious Paper: Pseudolaw as a Revolutionary System" (Paper delivered to the Centre d'expertiseet de formation sur les intégrismes religieux et la radicalisation (CEFIR) symposium: 'SovereignCitizens in Canada', Montreal, 3 May 2018).3 At 7.4 At 8. As the authors note, however, these types of arguments tend to be fluid (or jumbled), andaccordingly may not always be capable of clear articulation.natural rights, governments assert their authority over natural or 'fleshand blood' persons to make them subjects. Governments do that, forexample, when a birth certificate, bank account, driver's license orgovernment identity is issued. Those actions create an 'artificial'person – a legal person, personality, corporation, or 'strawman' – overwhom the government and its agencies, which are parallel corporateforms, have jurisdiction. The crucial aspect is that the nature or livingman or woman is freed from government subjection when they asserttheir status, claim it, and prove it.[12] These theories have been rejected consistently by the Courts as lacking anylegal foundation. In Niwa v Commissioner of Inland Revenue, Ellis J observed thatattempts to employ such concepts to avoid or defeat any state, regulatory, contract,family or other obligations recognised by law "will inevitably be an abuse ofprocess".5 And as the Court of Appeal has held:6[11] Acts of Parliament, including criminal enactments, are binding on allpersons within the geographical territory of New Zealand. The Courts of NewZealand must uphold all Acts of Parliament as enacted. No person withinNew Zealand is able to dissociate themselves from their 'legal persona' so asto remove themselves from the jurisdiction of the courts. The argumentsadvanced by [the appellant] are untenable and without legal foundation.[13] It follows that there is no basis for Mr DeMarco's claim that the Court does nothave jurisdiction. However he may be referred to or described, Mr DeMarco is subjectto the jurisdiction of this Court.[14] As Mr Hindriksen observed, Mr DeMarco's protest to jurisdiction should meanthat he would wish to withdraw his appeal. Because Mr DeMarco's position on thatpoint when it was discussed with him is less than clear, I proceed to determine theapplication that is before the Court.Procedural steps in the appeal[15] Because Mr DeMarco did not file evidence in support of his application toreverse the Official Assignee's decision under s 226 of the Act,7 Churchman J directedon 28 November 2022 that the matter would be adjourned until the Judge's Chambers5 Niwa v Commissioner of Inland Revenue [2019] NZHC 853, [2019] NZAR 1104.6 Warahi v Chief Executive of the Department of Corrections [2022] NZCA 105 at [16].7 And following exchanges between the parties over Mr DeMarco's requests for information fromthe Official Assignee.List on 1 February 2023 and that Mr DeMarco was to file affidavits in support of hisapplication 10 working days before that.[16] Mr DeMarco did not file evidence as directed. As a result, the OfficialAssignee applied on 26 January 2023 for an order that, unless Mr DeMarco filed hisaffidavit evidence within 10 working days, the proceeding be dismissed or,alternatively, requiring Mr DeMarco to pay security for the Official Assignee's costsand staying the proceeding until security is given.[17] When the case was called again on 1 February 2023, Isac J directed the case tobe recalled on 6 March 2023 on the basis that Mr DeMarco was to file evidence insupport of the review application five working days prior to the call. Again,Mr DeMarco did not file any evidence. He did, however, file a memorandum in whichhe sought tailored discovery. He filed an affidavit, witnessed by a notary public in theState of New York, in support of that application but the affidavit did not touch uponmatters relating to the basis for the appeal.[18] In a minute of 7 March 2023, Grice J observed that the affidavit containedmatters that are more properly described as submissions and that nothing meaningfulhad been filed either in support of the appeal or of the Official Assignee's application.No application for discovery was made – but discovery would not appear to beappropriate on this appeal in any event.[19] Mr DeMarco was directed by Grice J to file any notice of opposition andsupporting evidence to the security for costs application by 27 March 2023. Nothingwas filed and so, on 13 April 2023, counsel for the Official Assignee filed amemorandum seeking orders for security for costs as moved on the papers.[20] On 26 April 2023, Mr DeMarco filed the memorandum, the affidavit and theproclamation referred to in paragraph [6] above. Although those documents did notprovide information in support of the appeal or in opposition to the Official Assignee'sapplication, they were headed as being "in response to minute of Grice J dated 7 March2023" and they were taken by the Court as being the documents that Mr DeMarcowanted the Court to have when it considered the Official Assignee's application forsecurity for costs. The application was set down for hearing on that basis.[21] On 10 June 2023, Mr DeMarco filed the memorandum referred to in [6] aboveand, on the same day, he filed a statement of claim in two different proceedings (CIV-2021-485-524 and CIV-2021-485-130) which raised matters that were very much thesame as those referred to in [7] and [8] above and which are not relevant to thisapplication.Legal principles[22] Under r 5.45 of the High Court Rules 2016 (to summarise the relevant termsof the rule), if a Judge is satisfied that there is reason to believe that a plaintiff will beunable to pay the costs of the defendant if the plaintiff is not successful, then a Judgemay, if he or she thinks it just in all the circumstances, order the giving of security forcosts. If an order is made, then a sum that it is considered sufficient by the Judge is tobe paid into Court or, alternatively, the party is to give security for the sum to thesatisfaction of the Judge or the Registrar. The proceeding must be stayed until the sumis paid or the security given.[23] As counsel for the Official Assignee observes, the rule requires the Court toconsider three questions:8(a) Is there reason to believe the plaintiff will be unable to meet an awardof costs against it? This is the threshold question.(b) Should the Court exercise its discretion to make an order for securityfor costs?(c) What amount should security be fixed at and should a stay be orderedpending payment?8 Highgate on Broadway Limited v Devine [2012] NZHC 228, [2013] NZAR 1017 at [6].Is there reason to believe the plaintiff will be unable to meet an award of costsagainst him?[24] This threshold question needs to be determined on the facts. The same factualinquiry was undertaken by Woolford J in 2022 when he considered another appealfrom Mr DeMarco, under s 266 of the Act against different decisions on the part of theOfficial Assignee.9 In that case, Woolford J said:[55] There appears to be no dispute on this matter [that Mr DeMarco isimpecunious]. Mr DeMarco submits the Registrar of the Court of Appealerred by not recognising his impecuniosity. [25] In addition, Mr DeMarco is an adjudicated bankrupt. He has been adjudicatedbankrupt also in the United States following a petition by the Official Assignee. Astatement of his assets and liabilities, filed in the US bankruptcy proceedings, showsthe value of his liabilities to be well in excess of the value of his assets. And it showsthat, at the time it was filed, Mr DeMarco had no income, only government assistance.[26] Moreover, Mr DeMarco did not pay the security for costs awarded byWoolford J and the proceedings to which the security related were struck out by theCourt on 14 December 2022.[27] The threshold test is clearly met – there is good reason to believe thatMr DeMarco will not be able to meet an award of costs against him.Should the Court exercise its discretion to make an order?[28] The Court's discretion under r 5.45 is a reflection of the need for the Court tobalance the interests that a defendant has in being protected from a barren costs orderand the right that a plaintiff has to access to the Court; a right that is not lightly to bedenied.10 A number of considerations can be relevant to the Court's assessment.119 DeMarco v Official Assignee [2022] NZHC 1481.10 The balancing act between these respective interests is described in A S McLachlan Ltd v MELNetwork Ltd (2002) 16 PRNZ 747 (CA); and Reekie v Attorney-General [2014] NZSC 63, [2014]1 NZLR 737.11 Highgate on Broadway Limited v Devine, above n 7, at [22]–[24].[29] The first of them is a consideration of the merits and prospects of success of aplaintiff's claim. While it is not appropriate that a Court predetermine the merits of acase or form more than an impression, if a prima facie can be established that aplaintiff's claim is unmeritorious, that will be a factor in favour of security.12[30] While Mr DeMarco has chosen not to file affidavit evidence in support of hissubstantive application, it seems sufficiently clear that the appeal is without merit.[31] Mr DeMarco asked the Official Assignee to approve his travel to the UnitedStates on 20 September 2022, proposing a departure date "as soon as possible" and areturn date of 18 October 2022.13 He wished to travel to see his mother who was94 years of age and whose health was deteriorating. He said that his departure wouldbe temporary, that his employer would purchase his return air fares and that the ParoleBoard had brought his parole to an end to enable him to take the trip.[32] The next day, the Official Assignee told Mr DeMarco that he would give urgentconsideration to the travel request. The Official Assignee said that, in order to do so,he would need Mr DeMarco to provide, urgently, a completed statement of affairs(including details of assets and liabilities in the United States), evidence ofMr DeMarco's parole conditions being discharged and information about his costs inthe United States and how they would be met.[33] Mr DeMarco responded that same day by attaching a copy of the ParoleBoard's decision and providing some other information but he did not provide hiscompleted statement of affairs as requested.[34] The Official Assignee observed that the Parole Board's decision recorded thatMr DeMarco had been charged, just recently at that point, with breach of his paroleconditions for attempting to fly to the United States in August 2022 without priorapproval from the Probation Service. It records that he was subject to bail conditionsat that time, including the surrender of his passport. In light of this information, theOfficial Assignee asked Mr DeMarco to provide copies of documents recording the12 At [22(c)].13 The application was made under reg 11 of the Insolvency (Personal Insolvency) Regulations 2007.charge that he was facing and a bank statement or other evidence showing how it wasthat he was able to purchase the ticket to the United States at Auckland airport on thatoccasion. It reiterated again the need for Mr DeMarco to provide his statement ofaffairs.[35] While, ultimately, charges are not being pursued for the breach of paroleconditions in August 2022, the events demonstrated that Mr DeMarco wasendeavouring to leave the country at that point not only in breach of his paroleconditions but without the consent of the Official Assignee. The Assignee wasconcerned that Mr DeMarco would do it again.[36] Members of the office of the Official Assignee were documenting theAssignee's decision on Mr DeMarco's application on the evening of 23 September.That same evening, the Assignee was advised by Interpol that Mr DeMarco had flownto the United States the previous night – that is, on 22 September 2022.[37] While, perhaps, there was little to be achieved by it at that point in time, theOfficial Assignee issued his decision that evening, which was that he would consentto Mr DeMarco travelling to the United States provided that he first satisfied theAssignee of certain conditions including:(a) the provision of a return ticket to New Zealand issued in his name fortravel back to New Zealand by 18 October 2022;(b) a completed statement of affairs; and(c) details of particularised assets that the Official Assignee suspectedMr DeMarco held or had recently dispersed.[38] As Mr Viljoen has said in evidence for the Official Assignee in thisproceeding,14 the Official Assignee took into account a range of factors in making hisdecision, including Mr DeMarco's interests under the New Zealand Bill of Rights Act1990, and humanitarian or compassionate considerations arising from the health of14 Affidavit of Christoffel Johannes Viljoen of 26 January 2023.Mr DeMarco's mother. On the other side of the equation, the Official Assignee tookinto account the fact that the bankrupt estate had made no recoveries, that Mr DeMarcohad failed continually to provide the information required of him under the InsolvencyAct and the flight risk that Mr DeMarco presented.[39] In circumstances in which permission was given for Mr DeMarco to travel butonly on receipt of certain information that Mr DeMarco was required, under the Act,to provide in any event, it is difficult to discern a tenable basis for the appeal.[40] A number of other discretionary factors can be relevant under r 5.45, but feware relevant on the facts of this case. For example, the Court sometimes inquireswhether a defendant's actions have caused the plaintiff's impecuniosity. There is nosuggestion of that here. Sometimes, there can be allegations of delay on the part of adefendant. Again, there is no delay here. The Official Assignee has acted promptlyboth in assessing the travel application and in the steps it has taken in this proceeding.Sometimes, it might be the case that a plaintiff could have access to third party fundingor to legal aid. That is not the case here.[41] The conduct of the parties is relevant also. The Official Assignee refers toMr DeMarco having been an irresponsible litigant in The Vintage Aviatorproceedings,15 in which, in striking out certain parts of Mr DeMarco's pleading,reference was made to there being no proper basis for claims, and to pleadings beinginadequate.16[42] As Mr Viljoen has explained in evidence, Mr DeMarco has denied repeatedlythe Official Assignee's authority to administer his bankrupt estate. It is put on thebasis that Mr DeMarco is vexing the Official Assignee which operates as an indirectattack on the petitioning creditors and on The Vintage Aviator Limited which is thevictim of his fraud for which he was imprisoned.1715 The Vintage Aviator Limited v DeMarco [2021] NZHC 847.16 See for example [32], [106]–[110]; and The Vintage Aviator Limited v DeMarco [2021] NZHC1476, in which Mr DeMarco was denied leave to defend proceedings and The Vintage AviatorLimited v DeMarco [2021] NZHC 1912, in which Mr DeMarco was declined leave to appeal fromthe last-mentioned decision.17 See The Vintage Aviator Limited v DeMarco [2021] NZHC 3096, the decision of Grice J givingjudgment on Mr DeMarco's wrongful acts relating to the aircraft and the judgment of the Court of[43] It is fair to say, as counsel for the Official Assignee does, that the Court ofAppeal has commented adversely on Mr DeMarco's approach in the litigation that hasbeen mentioned. In delivering a judgment on Mr DeMarco's application to review theDeputy Registrar's refusal to dispense with security for costs on his appeal against theorder adjudicating him bankrupt, it was said that the prospects of success on the appealwere limited and that the Court was: satisfied that this is not a case that a solvent appellant would reasonablywish to prosecute. Rather, it seems to be a further step in a very long-drawn-out effort to deprive the judgment creditors of the fruits of their judgment".18[44] For all of these reasons, I find it to be just in all of the circumstances to orderthe giving of security for costs.How much security should be paid?[45] The amount of security to be ordered is a matter for the discretion of the Court.A useful starting point will always be the costs to which a defendant would be entitledunder the High Court Rules. However, the amount need not necessarily be fixed byreference to likely costs awards – it is a matter of what the Court thinks fit in all of thecircumstances.19[46] The Official Assignee, in a schedule to its submissions, calculates scale costson a 2B basis prospectively from the date of the security for costs application as being$16,849.50. The costs calculations include steps that would be taken in opposing theapplication that Mr DeMarco has already made for tailored discovery and which hasbeen repeated on several occasions in memoranda from Mr DeMarco. I see that asbeing a reasonable approach and will award security on that basis.[47] Under r 5.45(3)(b) of the High Court Rules, the Court must stay the proceedinguntil a sum by way of security is paid, or the security given. Special circumstancesmight enable a different approach to be taken but there are no such circumstances inthis case.Appeal in DeMarco v R [2022] NZCA 145, in which the Court declined Mr DeMarco's applicationfor leave to withdraw notice of abandonment of appeal against conviction.18 DeMarco v Anderson [2022] NZCA 57 at [14] and [15].19 A S McLachlan Limited v MEL Network Limited, above n 10, at [27]–[30].Costs on this application[48] The Official Assignee has applied for the following costs on this application:Step20 DescriptionTimeallocationSum($2,390 perday)22 Filing interlocutory application forsecurity for costs0.6 days $1,434.0024 Preparation of written submissions 1.5 days $3,585.0025 Preparation by applicant of bundle forhearing0.6 days $1,434.0026 Appearance at hearing for sole counsel 0.5 days $1,195.0029 Sealing order or judgment 0.2 days $478.00Total 3.4 days $8,126.00Description SumFiling fee on interlocutory application (as per the Court's receipt dated26 January 2023; T110263)$500.00[49] The Official Assignee is entitled to its costs on this application. The proceduralhistory in the proceeding, described at [15] to [21] above, shows the trouble to whichthe Official Assignee has been put in this case and it is only reasonable to award scalecosts – well below the Official Assignee's actual costs – in these circumstances.Result[50] I make the following orders:(a) Mr DeMarco is to pay $16,849.50 as security for costs.(b) The sum of $16,849.50 is to be paid into court or secured to thesatisfaction of the Registrar.(c) This proceeding is stayed until the sum is paid or secured to thesatisfaction of the Registrar.20 High Court Rules 2016, sch 3.(d) Mr DeMarco is to pay the Official Assignee's costs on this applicationof $8,126 and $500 in disbursements._____________________Radich JSolicitors:Meredith Connell, Auckland for Respondent