FUATI v JIN [2023] NZCA 281

FUATI v JIN [2023] NZCA 281 [6 July 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA219/2022[2023] NZCA 281BETWEEN MUSABAYOUFU FUATIAppellantAND ZUORU JINFirst RespondentOFFICIAL ASSIGNEESecond RespondentCounsel: P C Murray for AppellantD Z Zhang and E T Tie for First RespondentNo appearance for Second RespondentJudgment:(On the papers)6 July 2023 at 9.30 amJUDGMENT OF GILBERT J[Costs]A The appellant must pay costs to the first respondent in the sum of $8,365.B The Registrar is to pay the sum of $7,060 held as security for costs to thefirst respondent in part satisfaction of the appellant's costs liability.____________________________________________________________________REASONS[1] Mr Fuati was adjudicated bankrupt on 11 April 2022 for non-payment of coststhat were awarded against him by the High Court in favour of Mr Jin. Mr Fuati'sappeal against the order for adjudication was dismissed by this Court on 11 May 2023.1Mr Jin now seeks an award of costs for successfully resisting the appeal.1 Fuati v Jin [2023] NZCA 165.[2] Mr Fuati opposes the application. He says that because no award of costs wasmade in the judgment, costs should lie where they fall. However, if costs are to beawarded, he challenges various aspects of Mr Jin's calculation. He contends that costsshould be calculated in the sum $8,365, not $11,113.50 as claimed. Mr Fuati alsoseeks a direction that the amount he paid as security for costs should be refunded tohim on the basis that any costs award is a debt provable in his bankruptcy unders 232(1)(b) of the Insolvency Act 2006.Should costs lie where they fall?[3] The issue of costs was not dealt with in the judgment. I can see no reason whycosts should not follow the event in the usual way.Calculation of costs[4] Mr Murray, for Mr Fuati, challenges Mr Jin's claim for costs in respect of thefollowing items: (a) filing a memorandum setting out additional grounds to supportthe judgment; (b) a joint memorandum seeking the allocation of a hearing; (c) a jointmemorandum seeking a timetable for the exchange of submissions; (d) filing a list ofissues; and (e) an allowance for second counsel. I consider these objections are wellmade. Mr Murray advises that the joint memoranda (items (b) and (c)) were preparedby counsel for Mr Fuati. In these circumstances, Mr Jin can hardly claim costs forthese memoranda, which are not allowed for in sch 2 of the Court of Appeal (Civil)Rules 2005 in any case. Items (a) and (d) are also not allowed for separately in sch 2.I consider the costs of these steps are adequately covered in this case as part of theallowance for preparing for the hearing of the appeal. On balance, I am not persuadedthat an allowance for second counsel should be made.[5] With these adjustments, the amount that should be awarded for costs is $8,365.Should security for costs be refunded to Mr Fuati?[6] Section 231(1) of the Insolvency Act defines a provable debt as a debt orliability that a creditor of the bankrupt may prove in the bankruptcy. Section 232(1)defines what a provable debt is:232 What debts are provable debts(1) A provable debt is a debt or liability that the bankrupt owes—(a) at the time of adjudication; or(b) after adjudication but before discharge, by reason of anobligation incurred by the bankrupt before adjudication.[7] The costs in respect of this appeal were incurred after Mr Fuati was adjudicatedbankrupt. It was after all an appeal against the order making him bankrupt. His rightof appeal did not arise until the adjudication order was made. It follows that Mr Fuati'sliability for costs on the appeal was an obligation he incurred after adjudication, andhe had no liability for these costs at the time of the adjudication. Accordingly, thecosts award is not a provable debt. The costs award is not a debt that will be payablefrom the proceeds of Mr Fuati's estate in bankruptcy.2[8] This case is clearly distinguishable from Bradbury v Commissioner of InlandRevenue, the authority relied on by Mr Fuati.3 There, the contingent costs liabilityarose in respect of proceedings that were filed prior to the bankruptcy adjudication.[9] The amount paid as security for costs on the appeal should be disbursed to thefirst respondent as the successful party in the usual way.Result[10] The appellant must pay costs to the first respondent in the sum of $8,365.[11] The Registrar is to pay the sum of $7,060 held as security for costs to the firstrespondent in part satisfaction of the appellant's costs liability.Solicitors:Nigel L Fagan, Auckland for AppellantAdvent Ark Lawyers, Auckland for First Respondent2 Gibson v Official Assignee [2015] NZHC 3200.3 Bradbury v Commissioner of Inland Revenue [2015] NZSC 80, [2015] 1 NZLR 739. See alsoGibson v Official Assignee, above n 2; and Montgomerie v Montgomerie [2021] NZCA 639.