BIGNELL v NELSON SUN CLUB INCORPORATED [2020] NZHC 1553

BIGNELL v NELSON SUN CLUB INCORPORATED [2020] NZHC 1553 [3 July 2020]IN THE HIGH COURT OF NEW ZEALANDNELSON REGISTRYI TE KŌTI MATUA O AOTEAROAWHAKATŪ ROHECIV-2019-442-81[2020] NZHC 1553UNDER the Insolvency Act 2006BETWEEN GARY ARTHUR BIGNELLApplicantAND NELSON SUN CLUB INCORPORATEDRespondentHearing: 29 June 2020(By AVL)Counsel: L F McDonald for ApplicantG J Praat for RespondentJudgment: 3 July 2020Reissued: 15 July 2020JUDGMENT OF ASSOCIATE JUDGE LESTERThis judgment was re-issued on 15 July 2020 under the slip rule.This judgment was delivered by me on 3 July 2020 at 3.00pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy Registrar3 July 2020[1] The applicant, Gary Arthur Bignell (Mr Bignell), seeks that a proposed causeof action disclaimed by the Official Assignee be vested in him, pursuant to s 119(2) ofthe Insolvency Act 2006 (the Act).[2] Section 119 of the Act provides:119 Position of person who suffers loss as result of disclaimer(1) A person suffering loss or damage as a result of disclaimer by theAssignee may—(a) claim as a creditor in the bankruptcy for the amount of the lossor damage, taking account of the effect of an order made bythe Court under paragraph (b):(b) apply to the Court for an order that the disclaimed property bedelivered to, or vested in, that person.(2) The bankrupt may also apply for an order that the disclaimed propertybe delivered to, or vested in, the bankrupt.(3) The Court may make an order under subsection (1)(b) or (2) if it issatisfied that it is fair that the property should be delivered to, orvested in, the applicant.[3] Mr Bignell was adjudicated bankrupt on 15 September 2016 and dischargedon 20 September 2019. On 10 September 2019, the Official Assignee disclaimed anyinterest in the cause of action Mr Bignell seeks to be vested in him. At the time of thedisclaimer, Mr Bignell's solicitors had prepared a draft statement of claim setting outthe cause of action and the disclaimer cross-referenced to that draft claim.Mr Bignell's draft statement of claim is produced to the Court.[4] The application is opposed by the proposed defendant in those proceedings,Nelson Sun Club Incorporated (the Sun Club).Legal principles[5] Both counsel referred to Moore J's decision in Robinson v IAGNew Zealand Ltd, both referring to the following passage:11 Robinson v IAG New Zealand Ltd [2016] NZHC 3149 at [50].The effect of this provision is that the Court enjoys a broad and largelyunfettered discretion. It may make an order under s 119(2) if it consider it is"fair" to do so. In the absence of restrictive language in subsection (3),I consider this assessment should be made in an holistic manner and in lightof all the surrounding circumstances the Court considers relevant.[6] Mr McDonald, counsel for Mr Bignell, highlighted that this applicationinvolves an access to justice issue.2 While Mr McDonald did not put it in this way,I took his submission as being that because the court should be cautious in inhibitinga right of access to the court, unless there were other factors standing squarely againstthe application being granted, fairness would generally favour a cause of action beingvested in Mr Bignell.[7] Mr McDonald referred to my decision in Burgess v Beaven, that fairness alsoinvolved considering the strength of the proposed claim (vesting not being appropriateif the claim was not reasonably arguable), the effect of delay in the claim being broughtand finally the interests of the proposed defendants.3[8] Mr McDonald suggested that a similar standard to that in a defendant'ssummary judgment application was a helpful analogous standard to assessing theproposed strength of the claim. The submission was if a claim was reasonablyarguable, then in the absence of some compelling factor, an applicant seeking thata disclaimed cause of action vested in them should be allowed their day in court.[9] Mr McDonald submitted an application for vesting was not the forum in whichto conduct a trial of the cause of action sought to be vested. Counsel submitted:If there are factual disputes that cannot be resolved without a full trial, it [thecourt] will not decline the vesting order on this basis. However, if it isapparent on the affidavit evidence that the claim is legally or factuallyunsustainable [the court] will decline the order.I agree with that submission.2 Mr McDonald referred to Independent Fisheries Ltd v Minister for Canterbury EarthquakeRecovery [2012] NZHC 1810, where Chisholm J said that access to the Court is "deeplyembedded in the law[s]" of New Zealand at [162]; and that the right of access to the Courts wasa fundamental right at [163].3 Burgess v Beaven [2020] NZHC 497 at [18].[10] Ultimately, as Toogood J observed in Goldstone v Goldstone:4 all of the surrounding circumstances should be taken into account so far asthey bear on what the Court may consider just, but the Court's decision mustreflect the context in which the application is made.The facts of the present application[11] Mr Bignell and his wife (Mrs Bignell) were members of the respondent. On10 February 2018, the Sun Club held a Special General Meeting (the FebruaryMeeting) at which a vote occurred expelling Mr Bignell as a member.[12] Mrs Bignell resigned her membership on 8 February 2018. The draft statementof claim says she did so, having no confidence that the issue of her expulsion wouldbe dealt with fairly by the Sun Club. In the draft statement of claim, Mrs Bignellbrings a claim in her own right in respect of what, in effect, is a claim of constructiveexpulsion. She also brings a separate claim relating to losses said to have beenincurred in the removal of a sleep-out she claims she owned which had been locatedon the Sun Club's land. Members of the Sun Club were able to locate sleep-outs orcaravans on the Sun Club's property and pay a licence or rental fee accordingly.[13] The Sun Club says the February Meeting was prompted by the fact TasmanDistrict Council (TDC) had issued a Notice to Fix in respect of non-compliant aspectsof Mrs Bignell's sleep-out, in particular that it had been located within five metres ofthe boundary. That Notice was dated 18 July 2017. The Sun Club says it passed theNotice to Fix on to the Bignells in late July 2017 and agreed to the Bignells' requestfor an extension of time to comply with the Notice, the extension being given to18 December 2017.[14] The Sun Club says the Bignells failed to address the issue in the Notice to Fixwhich resulted in TDC issuing an abatement notice on 2 February 2018.[15] The draft statement of claim includes a damages claim by Mrs Bignell relatingto the sleep-out, a cause of action by Mrs Bignell relating to the circumstances in4 Goldstone v Goldstone [2019] NZHC 1649 at [18].which she resigned from the Sun Club. Mr Bignell seeks to join in that cause of actionon the basis that his expulsion was:(i) without any reasonable basis and in breach of his contract with the SunClub; and/or(ii) was brought for an improper purpose or on a bad faith basis.[16] The membership claim is pleaded as a breach of contract; the contract beingthe Constitution between the Sun Club and its members. Mr McDonald submitsa member's ability to enforce the rules of an incorporated society as a control isa recognised cause of action and he referred to cases where such claims have beensuccessfully brought.5Respective arguments[17] As noted above, Mr Bignell says the cause of action he wishes to pursue is onerecognised by the court. To the extent the claim depends on factual issues, whichcannot be resolved in a summary application such as this, he says the presence of suchdisputes does not mean he does not have a reasonably arguable cause of action.[18] Mr Bignell says he has not delayed matters unduly. Mr McDonald notes theSun Club does not raise delay in its notice of opposition. Some delay has occurred.The date of the meeting of which Mr Bignell complains was 10 February 2018. Thisapplication was commenced at the start of December 2019. However, the Sun Clubdoes not suggest any prejudice flowing from the delay.[19] As far as the interests of the Sun Club are concerned, other than the normaldetriment of being involved in proceedings, the Sun Club does not point to anyparticular detriment. Significantly, Mr Bignell says Mrs Bignell will be bringing herclaim in any event.5 See Church v Commerce Club of Auckland [2006] NZAR 494 (HC); Henderson v Kane & PioneerClub [1924] NZLR 1073 (SC); Millar v Smith [1953] NZLR 1049 (SC); Gibson v New ZealandLand Search and Rescue Dogs Inc [2012] NZHC 1320; Byrne v Auckland Irish Society Inc [1979]1 NZLR 351 (SC).[20] Accordingly, the Sun Club is going to be involved in proceedings concerningthe process by which Mrs Bignell was "constructively expelled" from the Sun Clubwhich will require a consideration of issues very similar, if not identical to those,Mr Bignell wishes to raise.[21] The Sun Club's submissions seek to justify the circumstances leading to thevote at the February Meeting noting Mr Bignell did not attend. The Sun Club saysthe effect of Mr Bignell's claim is that he now wants to litigate what occurred at theFebruary Meeting more than two years after the event and that it is not fair tothe members, who having dealt with the issue at the time, are now being askedto justify what occurred. The Sun Club says the time for Mr Bignell to advocate forhis position and persuade his fellow members that he should continue to be a memberhas come and gone.[22] The Sun Club submits it is unfair to now endeavour to unwind the decisionmade by Mr Bignell's fellow members. The submission is that the right of membersto govern their own affairs in accordance with their Constitution should be respected.A final decision was made and should stand. Mr Bignell chose not to attend theFebruary Meeting, so must live with the outcome.[23] The reality, however, is that Mr Bignell is saying the process by which he wasremoved as a member was tainted as he says it was commenced for an improperpurpose or was brought on a bad faith basis or in breach of the rules of natural justice.Hence, Mr Bignell says it is no answer to say he should have engaged in an unfairprocess.[24] At the hearing, Mr McDonald advised the Court his instructions were that theBignells did not receive the email notification of the February Meeting. Ina memorandum filed after the hearing, Mr McDonald corrected that advice. Mr Praataccepted it was proper for that correction to be given, albeit he objected to the balanceof Mr McDonald's memorandum that sought to address the effect of the correction.Mr McDonald's client, upon checking emails, accepted notice was given of theFebruary Meeting. Having properly brought the correct state of affairs to the Court'sattention, I considered the brief submissions made as to its effect. While theacknowledgment weakens the Bignells' argument that they were not given notice ofthe February Meeting, an issue remains as to whether the notice gives sufficient detailsof how the Bignells' conduct was a breach of the rule relied on by the Sun Club. Noris the fact notice was given an answer to the claim that the expulsions were initiatedin bad faith.[25] I am satisfied it is fair that the cause of action disclaimed by the OfficialAssignee be vested in Mr Bignell and there is an order accordingly.[26] Mr Bignell's claim includes seeking an order that his membership of the SunClub be restored. This claim was one the Official Assignee had no incentive to pursue,whatever its merits. Mr Praat, counsel for the Sun Club, accepted the claim Mr Bignellsought to pursue raised numerous factual issues – I agree. The place for such to bedetermined is a hearing unless the factual position of one party can be dismissed.6[27] At the end of the day, Mrs Bignell will be bringing her proceeding covering inrespect of the same membership issues. I do not consider it is unfair to the Sun Clubfor Mr Bignell's claim to be pursued at the same time. The Sun Club as defendant inthese proceedings will be free to apply for security for costs if it thinks that isappropriate.[28] There is an order in terms of paragraph 1(c) of the originating application dated5 December 2019.____________________________Associate Judge LesterSolicitors:Hamish Fletcher Lawyers, NelsonKnapps Lawyers, Nelson6 By applying the standard from Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341E.