FLOW CONTROL LTD v IL FORNO LTD [2021] NZHC 1159

FLOW CONTROL LTD v IL FORNO LTD [2021] NZHC 1159 [24 May 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-002409[2021] NZHC 1159UNDER Companies Act 1993, s 290BETWEEN FLOW CONTROL LIMITEDApplicantAND IL FORNO LIMITEDRespondentCIV-2020-404-002196UNDER Insolvency Act 2006, s 17BETWEEN IL FORNO LIMITEDJudgment CreditorAND DOUGLAS JAMES KLEINEJudgment DebtorHearing: 5 May 2021Appearances: J Kleine, Judgment Debtor in PersonNo appearance for Applicant (but J Kleine, director, in attendance)M Lenihan for Respondent / Judgment CreditorJudgment: 24 May 2021JUDGMENT OF ASSOCIATE JUDGE P J ANDREWThis judgment was delivered by Associate Judge Andrewon 24 May 2021 at 4.00 pmpursuant to R 11.5 of the High Court RulesRegistrar / Deputy RegistrarDate .Introduction[1] There are two applications before the Court: an application to set aside abankruptcy notice, under s 17 of the Insolvency Act 2006 (CIV-2020-404-2196), andan application to set aside a statutory demand, under s 290 of the Companies Act 1993(CIV-2020-404-2409).[2] The judgment debtor, Mr James Kleine ("Jim") is the sole director andshareholder of Flow Control Ltd ("Flow Control"). Flow Control has been servedwith a statutory demand by Il Forno Ltd ("Il Forno"). The sole director andshareholder of Il Forno is Mr Andrew Kleine ("Andrew"). Andrew and Jim arebrothers.1[3] The statutory demand and bankruptcy notice, issued by Il Forno against Jim,are based on debts arising from two judgments of Jagose J in these proceedings: thesubstantive judgment following trial,2 and the subsequent costs decision.3[4] The result of those judgments is that Jim and Flow Control are jointly andseverally liable to pay costs to Il Forno in the sum of $89,974.36.[5] The critical issue in relation to the bankruptcy notice is whether Jim has a crossclaim under s 17(7) of the Insolvency Act.[6] In relation to the statutory demand proceedings, the critical issue is whetherthe application should be dismissed pursuant to r 10.8(a) of the High Court Rules 2016,which provides that if only the defendant, and not the plaintiff, appears at the hearing,and the claim is not admitted, the defendant is entitled to judgment dismissing theproceeding.1 This judgment refers to each of the brothers by their first name. This practice is consistent withthe way each of the brothers has referred to themselves in the course of the various stages of thislitigation. It is also consistent with the practice adopted in the substantive proceedings in thisCourt and also before the Disputes Tribunal.2 Il Forno Ltd v Kleine & Ors [2020] NZHC 1889 [substantive judgment].3 Il Forno Ltd v Kleine & Ors [2020] NZHC 2730 [costs judgment].Background[7] The background which led to the litigation is set out by Jagose J at thebeginning of his 31 July 2020 judgment:4[1] [Il Forno] operates a bakery and café of some repute and longevity inAuckland's Ponsonby, run respectively by [Andrew] and Helane Paula Mead.[2] On 26 October 2006, with financial assistance from Andrew'srespectively older and younger brothers [Jim] and Barry John Kleine("Barry"), Andrew acquired a former shareholder's half-interest in thebusiness. Jim also provided the business with professional accounting andother services. On 11 November 2015, Andrew terminated Jim's involvementwith the business, alleging Jim's professional accounting services wereinadequate and negligent, such as caused Il Forno to be liable for fines forfailing to file tax returns. [8] The proceedings were complex. Some sense of their complexity can beobtained from Jagose J's summary of the claim and counterclaim as set out below:5[3] In this proceeding, among other relief, Il Forno seeks to recover allmoney paid to [Flow Control] for Jim's services and on the fines liability.They, in turn, dispute any inadequacy or negligence, and assert their financialassistance to Andrew was to acquire Andrew's half-share in Il Forno for FlowControl. Flow Control also counterclaims for payment of some additional$650,000 as compensation for the balance of Jim's services to Il Forno, andan unquantified sum as damages for Andrew's alleged breach as Il Forno'sdirector of fiduciary duties owed to Flow Control, as holder of half its shares.Il Forno and Andrew respectively deny the foundation for any such liability.Various technical defences, including under the Limitations Acts 1950 and2010, also are raised by both sides.[4] To be precise, Il Forno seeks declarations Andrew is the sole and legalbeneficiary of Il Forno, and Jim's or Flow Control's involvement with it hasbeen cancelled (in terms of ss 37 and 41 of the Contract and Commercial LawAct 2017) and Il Forno has no further obligations to Jim or Flow Control; andclaims compensation under the 2017 Act, or as contractual and tortious(negligence) damages, in the amount of $43,277.61 (being the GST-exclusivefees paid to Flow Control within the limitation period), plus $13,600 in finesand costs, and legal fees incurred, arising out of the Commissioner of InlandRevenue's prosecution of Il Forno.[5] So far as the statutory and contractual money claims are concerned,Jim and Flow Control assert Il Forno failed to mitigate its losses byabandoning or discontinuing its appeal against the fines liability finding;Il Forno waived or is estopped from asserting any requirement for FlowControl's fees to be invoiced; and, if Jim is not Il Forno's half-shareholder,Flow Control has an equitable set-off for the $10,000 in financial assistance4 Substantive judgment, above n 2, at [1] and [2]. See also Flow Control Ltd v Il Forno Ltd [2021]NZHC 946. I have also adopted a number of passages from that judgment.5 Substantive judgment, above n 2, at [4]–[7].plus quarterly compounding interest since the date of its payment. On thenegligence claim, Flow Control and Jim say Il Forno's and Andrew'scontributory negligence caused Il Forno's losses.[6] Il Forno also seeks to recover the sum of the money claims as moneyhad and received by Flow Control and/or Jim on their services' failure toprovide consideration for its receipt. Flow Control and Jim again assertaffirmative defences of waiver and estoppel and limitation. And Il Fornoseeks to recover its electronic data in Flow Control's or Jim's possession intrespass or conversion.[7] By its counterclaim, Flow Control seeks a declaration Andrew holds5,000 shares in Il Forno on trust for Flow Control, and an order transferringthose shares to it. It also claims $650,000 (plus GST) quantum meruit forsome 25 services said to have been provided to Il Forno over the nine or soyears of Flow Control's involvement through Jim with Il Forno's business.Il Forno asserts the first four years of that involvement now is time-barred.And then there is Flow Control's breach of trust claim against Andrew, asmentioned.(citations omitted)[9] In a detailed 90-paragraph judgment, Jagose J determined that Andrew wasIl Forno's sole legal and beneficial owner and made a declaration to that effect inrespect of the first cause of action. Il Forno's second and third causes of action failedbecause the Judge was not satisfied there was an agreement for the provision ofaccounting services by Jim, as pleaded by Il Forno. He did, however, find that Jimfailed to take reasonable care preparing and filing Il Forno's tax returns and that hefailed to take reasonable care to maintain Il Forno's financial records. As aconsequence, he held Jim to be negligent in the performance of that duty to Il Fornoand awarded $14,185 in damages. He also directed Jim to deliver up to Il Forno itsfiles and information held by him. He dismissed all other causes of action, both in thesubstantive claim and counterclaim.[10] In his costs judgment of October 2020,6 Jagose J held that Flow Control andJim were jointly and severally liable to pay Il Forno costs in the amount of $91,828.00plus disbursements of $83,744, being a total of $175,572.[11] In the litigation, Flow Control was ordered to pay security for costs in the sumof $85,000. That sum was paid, together with interest of $597.64, to Il Forno's6 Costs judgment, above n 3.solicitors on 22 December 2020. Accordingly, the amount of costs and disbursementsnow payable by Flow Control and Jim is $89,974.36.[12] Neither Flow Control nor Jim has paid any of that amount.[13] Jim appealed, within time, the costs judgment of Jagose J to the Court ofAppeal. He also appealed against the substantive judgment, but out of time.Accordingly, for the substantive appeal, he requires the leave of the Court of Appeal.Flow Control has appealed neither the substantive judgment nor the costs judgment.[14] In a very recent judgment of Moore J in Flow Control Ltd v Il Forno Ltd,7 anapplication by Jim to represent Flow Control in these proceedings was dismissed.[15] There has been further, related litigation. As Moore J noted,8 Jim and anotherbrother, Mr Barry Kleine ("Barry") provided financial assistance for Andrew toacquire a former shareholder's half interest in the Il Forno business. In Jim's case, itwas a $10,000 advance which Jagose J determined was a loan.9 In their submissionson costs, Jim and Flow Control claimed that any costs award should be reduced dueto the effective success of their counterclaim in the Judge's finding relative to the$10,000 loan. Jagose J dealt with that submission in his costs judgment:10[7] I expressly did not find Andrew had any liability to Jim in respect ofthe loan. Neither is there any declaration in the defendants' favour Thereis no basis for their assertion "the quantum meruit claim has essentiallysucceeded on issue"; to the contrary, I held the defendants had not dischargedtheir onus of proof at all.[16] Moore J later noted:[13] Notwithstanding [Jagose J's finding], Flow Control commencedproceedings in the Disputes Tribunal ("the Tribunal") against Andrew and hispartner, Ms Mead, to recover the $10,000 loan and interest. Through Jim,Flow Control sought payment of the $10,000 loan plus interest. 7 Flow Control Ltd v Il Forno Ltd [2021], above n 4, at [5].8 Flow Control Ltd v Il Forno Ltd [2021], above n 4, at [2].9 Substantive judgment, above n 2, at [28]10 Costs judgment, above n 3, at [7].[17] At the hearing before the Disputes Tribunal, Andrew offered to pay back the$10,000 by way of a set-off against the costs award of Jagose J. The offer was declinedby Jim.[18] The Tribunal determined that Flow Control's claim was barred by theapplication of the res judicata doctrine. The Tribunal held it did not have jurisdiction.The referee found that Jagose J had considered the loan both in his substantivejudgment and in his costs judgment. The Tribunal's decision has since been appealedto the District Court by Jim.[19] In the alternative, the referee held that if the Tribunal were to assumejurisdiction it would have declined to make any award in favour of Flow Controlregardless. The referee noted that the loan made in 2006 is not evidenced by anywritten documentation and no terms were discussed other than Flow Control'sallegation that it was to be on the same terms as a $100,000 loan made by anotherbrother, Barry, at around the same time. Again, if the Tribunal were to have assumedjurisdiction, it would have dismissed the claim for interest based on Flow Control'sfailure to prove the terms of the loan, even if the principal was due. Finally, the refereeconcluded that it would be inequitable in terms of s 18 of the Disputes Tribunal Act1998 to order Andrew to pay Jim $10,000 while the "large" High Court order receivedfor the same dispute remained unpaid, therefore declining to do so.Application to set aside Bankruptcy NoticeRelevant legal principles[20] Section 17 of the Insolvency Act 2006 reads:Failure to comply with bankruptcy notice(1) A debtor commits an act of bankruptcy if–(a) a creditor has obtained a final judgment or a final order against thedebtor for any amount; and(b) execution of the judgment or order has not been halted by a court; and(c) the debtor has been served with a bankruptcy notice; and(d) the debtor has not, within the time limit specified in subsection (4),–(i) complied with the requirements of the notice; or(ii) satisfied the court that he or she has a cross claim against thecreditor.(2) The form that the bankruptcy notice must take is set out in section 29.(3) The debtor must have been served with the bankruptcy notice in NewZealand, unless the court gave permission for the service of the notice on thedebtor outside New Zealand.(4) The time limit referred to in subsection (1)(d) is,–(a) if the debtor is served with the bankruptcy notice in New Zealand, 10working days after service; or(b) if the debtor is served outside New Zealand, the time specified in theorder of the court permitting service outside New Zealand.(5) In this section, a creditor who has obtained a final judgment or a finalorder includes a person who is for the time being entitled to enforce a finaljudgment or final order.(6) In this section, if a court has given permission for enforcing anarbitration award that the debtor pay money to the creditor,–(a) final order includes the arbitration award; and(b) proceedings includes the arbitration proceedings in which the awardwas made.(7) In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, orcross demand that–(a) is equal to, or greater than, the judgment debt or the amount that thedebtor has been ordered to pay; and(b) the debtor could not use as a defence in the action or proceedings inwhich the judgment or the order, as the case may be, was obtained.[21] The case law makes it clear that in construing the words "could not use as adefence" in s 17(7)(b), the emphasis is on legal impediments. Practical or factualimpediments may also be considered provided there are cogent circumstances,however the mere failure to take advantage of an opportunity because ofinconvenience or difficulty will not be enough.1111 Hardy v Booth [1992] 1 NZLR 356 (HC) at 13; see also Clark v UDC Finance Ltd [1985] 2 NZLR636 (HC) at 640.[22] In Sharma v ANZ Banking Group (NZ) Ltd, the Court of Appeal articulated twoimportant propositions regarding the interpretation of the predecessor to s17(7):12(a) If a debtor does satisfy the Court that he has a counterclaim, set-off orcross demand that equals or exceeds the judgment debt and could nothave been set up in the action in which the judgment was obtained, thenthe result is that there is no relevant act of bankruptcy. The Court is notendowed with any discretion to allow the bankruptcy notice to stand;(b) The debtor must establish that the cross claim is a genuine triable claim.The words "genuine" and "triable" require the debtor to demonstratethat he has a claim of true substance that he genuinely proposes topursue.[23] The requirement that the asserted cross claim be a genuine triable claim is anoverarching requirement that applies to all three types of cross claims under s 17(7),namely counterclaims, set-offs and cross demands.13The issues[24] Jim contends that he has the following cross claims under s 17(7) of theInsolvency Act, and that in total they exceed the sum claimed in the bankruptcynotice:14Costs arising from the proceedings before Jagose J: $ 2,772.00Disbursements arising from the proceedings ofJagose J: $ 12,000.00A loan owed to Flow Control by Andrew togetherwith interest: $ 34,735.00Outstanding fees for delivery services performed byJim for Il Forno: $ 42,685.00Total: $ 92,192.0012 Sharma v ANZ Banking Group (NZ) Ltd (1992) 6 PRNZ 386 (CA) at 389; Wikeley v Jacomb [2014]NZCA 146 at [37]–[39].13 Wikeley v Jacomb, above n 12, at [40].14 I have not included the sum of $85,597, being security for costs that has been paid to Il Forno. Itis not in dispute that that sum should be deducted from the total costs and disbursements award of$175,572.[25] The critical issue I must determine is whether these cross claims constitutegenuinely triable issues for the purposes of s 17(7), or are they claims that were alreadydetermined by Jagose J in the earlier litigation and/or should or could have beenbrought as claims in that litigation.[26] I address each of the alleged cross claims in turn.Costs arising from the Jagose J proceedings[27] Jim contends that two cross claims arise in respect of the costs issues in thelitigation before Jagose J:(a) He was not allowed a set-off in the sum of $2,772, being costs he wasentitled to, he says, in accordance with Step 9, sch 3 of the High CourtRules 2016, and arising out of three amended statements of claim by IlForno; and(b) Il Forno claimed a disbursement in respect of an expert witness invoicefor Mr Lazelle in the amount of $12,000 to which it was not entitled.[28] It is clear that these claims arise directly out of the costs judgment of Jagose J,which is currently under appeal. They are not a "cross claim" as that term is definedin s 17(7) but, rather, a direct challenge to a binding judgment under appeal.[29] The question of costs following the substantive judgment was a live issuebefore Jagose J – and in the case of the Lazelle disbursement issue, was expresslyraised and addressed.15 His reserved costs judgment was issued following receipt ofsubmissions from the parties. The costs issues cannot be re-litigated in theseproceedings.[30] I further note that the fact that Jim has appealed the costs judgment of Jagose Jis immaterial to the current application since he has not applied to stay enforcementof Jagose J's substantive or costs judgments.15 Costs judgment, above n 3, at [4].The loan and interest[31] Jim contends that Jagose J made a finding that Flow Control had advanced thesum of $10,000 to Andrew as a loan. In the proceedings before Jagose J, Flow Controlpleaded in the alternative that the loan should operate as a set-off. Jim contends,however, that the set-off was never engaged, because there was no finding againstFlow Control and hence nothing to set-off against.[32] Jim further argues that Flow Control is not estopped from pursuing recoveryof that loan, plus interest at a commercial rate (on terms similar to Barry's loan) on thegrounds that there has been no adjudication of that issue. Jim relies in particular on[67] of Jagose J's judgment:I have considered if to set off Jim's loan to Andrew against that liability. MrLenihan argues recovery of the loan now is time-barred. But there are liveissues if the loan is to be regarded as having been made on demand in fact,and then if that is effective to defer the accrual of time to the point of demand,as the Limitation Act 2010 now expressly provides, and Jim does not pleadset-off in response to the claim in negligence. I therefore disregard anyliability Andrew may have to Jim on the loan I have found to exist.(footnotes omitted)[33] Jim acknowledges that the party entitled to sue for the recovery of the loan isFlow Control (in that it was the lender). He is critical of Jagose J describing the$10,000 payment as "Jim's loan". Jim contends that the extant right of Flow Controlto sue for the repayment of the loan from Andrew constitutes a cross claim that he,Jim, can rely upon under s 17(7). Jim says that both he and Flow Control are jointlyand severally liable for costs, in accordance with the award of Jagose J. Jim correctlyargues that if Flow Control's liability to Il Forno is reduced by deducting the loan plusinterest that Andrew owes, then his obligation to pay costs on a joint and several basiswill be correspondingly reduced.[34] Jim acknowledges that the relevant parties are not identical in that the loan isowed to Flow Control, not Jim, and the liable party is Andrew, not Il Forno. However,he relies upon the decision of Gallen J in Re Elvin, ex parte Sandilands,16 for theproposition that a cross demand may arise under s 17(7) where there is a sufficient16 Re Elvin, ex parte Sandilands [1990] 3 NZLR 124 (HC).degree of mutuality, coincidence or correlation between the circumstances out ofwhich the opposing claims arise. In such circumstances, it would be unjust to enforcea bankruptcy notice without reference to related claims which might substantiallyreduce his obligations as a debtor. He relies upon the following passage from thatjudgment:17The purpose of [s 17(7)'s predecessor under the 1967 Act] is to deal with a liswhich exists as between two comparable persons. Clearly it would be unjustif one having succeeded in obtaining a judgment against another, were able toenforce that without reference to other related claims which mightsubstantially reduce the obligation to pay.[35] There are some fundamental and fatal difficulties with these arguments. Insubstance, the alleged cross claim in relation to the loan, and indeed all the cross claimsthat Jim advances, are a collateral attack on the two judgments of Jagose J. As such,they clearly fall outside s 17(7). My reasons follow.[36] First, Jim has not established that the opposing claims are sufficientlyinterdependent;18 there is an absence of mutuality, coincidence or correlation betweenthe circumstances out of which the opposing claims arise. Jim cannot contend that hecould not have advanced the loan claim in the proceedings before Jagose J (as he wasnot a party to it) and then rely upon it in these proceedings based not on the fact thatthe cross claim is a claim to which he, as the judgment debtor, is entitled to sue uponbut, rather one that belongs to a separate entity, being Flow Control. This isparticularly the case where Jim was at all material times the controlling director ofFlow Control.[37] Even if I am wrong in the conclusion that there is an absence of sufficientmutuality or interdependence, I find that the claims in relation to the loan were eitherdirectly before Jagose J or could and should have been advanced by Flow Control inthose proceedings. There was clearly no legal impediment to Flow Control advancingits claims in relation to the loan by way of counterclaim. Again, therefore, such claimsfall outside the ambit of s 17(7).17 At 127.18 Wikeley v Jacomb, above n 12, at [45]. See also Grant v New Zealand Motor Corp Ltd [1989] 1NZLR 8 (CA) at 12 and 13.[38] The proceedings before Jagose J were filed in 2016 and the trial did not takeplace until July 2020. It is clear that this was a protracted family-related litigationinvolving three amended statements of claim, set-offs, counterclaims and numerousinterlocutory disputes. The claim of a loan was squarely at issue before Jagose J, evenif it was ultimately not available to Flow Control as a set-off.[39] Flow Control pleaded in its counterclaim filed in October 2016 that it paid$10,000 to Andrew.19 In its statement of defence to the third amended statement ofclaim dated 5 December 2019, Flow Control contended as follows:20Should this court not find that [Andrew] holds half of the ordinary shares in IlForno on trust for Flow Control, Flow Control will have an equitable set-offin the amount of $10,000 plus interest at a commercial rate, compoundingquarterly (being the same terms as the loan from Barry Kleine) since October2006.[40] In Andrew's brief of evidence of August 2017, there was an expressacknowledgement by Andrew that "the sum of $10,000 was a loan, borrowed like themonies I had borrowed from [Barry]". In his subsequent brief served in December2019, Andrew admitted that there was a $10,000 loan that would be repaid by Il Forno.In a further brief from Andrew dated 12 June 2020, he reiterated that the $10,000advance was a loan from Flow Control.[41] Throughout the proceedings before Jagose J, Jim and Flow Control wererepresented by competent counsel. There was ample opportunity to have amended thepleadings (if that were considered necessary) so to advance the claim in relation to theloan as a counterclaim, and have the matter squarely addressed and determined.[42] There are further and related reasons as to why the claim in relation to the loanand, indeed, all of the cross claims advanced, do not constitute genuinely triable issues.To now advance these cross claims, including those in relation to the loans, would inmy view constitute an abuse of process.19 See [29] of the statement of defence to seek an amended statement of claim and counterclaim,dated 26 October 2016.20 See also [27(n)] and [30] of the pleading. At [30] Jim relies on the same set-off.[43] The leading English authority on the Henderson v Henderson21 abuse ofprocess doctrine is the House of Lords decision in Johnson v Gore Wood & Co.22 Inthat case Lord Bingham held that the underlying public interest in the Henderson vHenderson abuse of process doctrine (considered separate and distinct from cause ofaction estoppel and issue estoppel), is that there should be finality in litigation and aparty should not be vexed twice in the same matter.[44] The general principles of abuse of process were recently considered by theCourt of Appeal in Craig v Stringer,23 where Gilbert J held as follows:(a) Citizens are entitled to have access to the courts;24(b) However, access is properly denied when the litigant seeks tomisuse the court's processes for an improper purpose such as tovex, harass or embarrass the other party rather than for thegenuine purpose of seeking to vindicate his or her legal rights;25(c) The parties are required to bring forward their whole case andwill generally be prevented from later attempting to re-open thesame subject on a different basis;26(d) The underlying policy of Henderson is to promote finality inlitigation and to ensure that a defendant is not oppressed bysuccessive suits. The objection is that the law will notcontemplate or tolerate apparently inconsistent decisions.27[45] In applying the principles in this case, I accept that Il Forno has the "heavyonus" of establishing an abuse of process.28 I also acknowledge the importance of theprinciple of access to justice. However, I agree with the submission of Mr Lenihanthat the facts of this case are a paradigm example of the application of the doctrine.21 Henderson v Henderson (1843) 3 Hare 100, 67 ER 313 (Ch) at 115.22 Johnson v Gore Wood & Co [2002] 2 AC 1 (HL).23 Craig v Stringer [2020] NZCA 260, (2020) 25 PRNZ 367.24 Craig v Stringer, above n 23, at [14].25 Craig v Stringer, above n 23, at [15].26 Craig v Stringer, above n 23, at [17].27 Craig v Stringer, above n 23, at [18].28 DHC Assets Ltd v Arnerich [2021] NZHC 277 at [22], referring to Williams v Spautz [1992] HCA34, (1992) 174 CLR 509.[46] I find that there was a clear obligation on Jim and Flow Control to have broughtforward their whole case in the proceedings before Jagose J. This includes all claimsin relation to the loan and, as I address below, the delivery services. I acknowledgebut doubt Jim's submission that Flow Control's claim against Andrew for the recoveryof the loan was not adjudicated upon by Jagose J. Regardless, Jim and Flow Control'sfailure to bring forward their whole case in the litigation before Jagose J is one of thefundamental reasons why these proceedings cannot succeed.[47] In any event, I find that the claim for interest on the loan to be a very tenuousone. As the Disputes Tribunal referee noted in the decision of 8 March 2021, there isno written documentation recording the alleged loan. And Jagose J in his judgment,noted that there was "no independent support for any payment of interest to Barry".Furthermore, as the Disputes Tribunal referee noted, it appeared that it was Jim's ownfailure to arrange for repayment of the loan that gave rise to the large claim for interestthat Flow Control now makes.Delivery charges and/or wages[48] The core of Jim's claims against Andrew, and Il Forno, is his contention thathe worked for them for more than a decade for very little (if any) remuneration. Healso contends the judgments of Jagose J have deprived Flow Control of considerableassets.[49] Jim contends that he is owed at least $42,685 for delivery driving services thathe personally performed. Based on the evidence Andrew is said to have given at trial,Jim raised against Il Forno a personal grievance under the Employment Relations Act2000. He did so on the assumption that he was an employee, and in relation to theunpaid delivery services in September 2020.[50] In his affidavit of 22 December 2020 before me, Jim says as follows:I have previously attempted to determine the correct forum to commence anaction to recover this sum [recovery under the delivery agreement].[Andrew's] remarks initially suggested that the Employment Tribunal was thecorrect forum, however Il Forno's denial that [Andrew] was describing anemployment relationship, may require this claim to be pursued in the DistrictCourt.[51] It is apparent that the claims Jim makes in relation to the supposed deliveryservices are somewhat contradictory. He now says that he was never an employee ofIl Forno. He acknowledges the confusion but contends that it was caused by freshevidence from Andrew and subsequently shifting grounds. However, regardless of thecorrect legal relationship between the parties in relation to any delivery servicesprovided, I find that the claims that Jim now makes in relation to them were squarelyaddressed by Jagose J. They cannot now be brought as a cross claim under s 17(7).[52] The claim in relation to delivery services was part of Flow Control's quantummeruit counterclaim against Il Forno. The quantum meruit claim for $650,000 wasdismissed in its entirety by Jagose J. His Honour describes the quantum meruit claimin the following terms:[74] On Flow Control's second cause of action, to be compensated inquantum meruit, Jim categorised in evidence some 25 services provided byFlow Control to Il Forno, and sought to substantiate them by reference to aspreadsheet of time spent on Il Forno's account from 20 October 2006 to 10November 2015. The spreadsheet identifies 23,200 hours of Jim's time overthat period, for which compensation is sought at $32.00 per hour plus GST.In net terms, after crediting sums paid by Il Forno, Flow Control seekspayment of $650,000 (plus GST) "or such other sum as the court finds to bethe value of services provided for which no payment was received".[53] In his costs judgment at [7], Jagose J held in relation to the quantum meruitclaim, that the defendants had "not discharged the onus of proof at all". He expresslyrejected a submission to the contrary by Jim and Flow Control.[54] Jim's reliance on Andrew's brief of evidence of 12 June 2020, specifically thathe had entered into a separate agreement for delivery driving, is misguided. The factthat this "separate agreement" was never expressly pleaded by Il Forno is not material.All of Flow Control and/or Jim's claims for delivery services could and should havebeen brought in the proceedings before Jagose J – and in substance were in fact dealtwith. There is no genuinely triable issue in relation to delivery services for thepurposes of s 17(7), and it would be an abuse of process for such claims to now bebrought.[55] Jim's approach of advancing what he says are further legitimate andundetermined claims against Andrew and/or Il Forno, are based primarily on alleged"late in the piece" admissions and/or on the shifting of positions by Andrew at trial.However, as I have noted, these claims are in substance an attempt to re-litigate matterswhich either were, ought to have been, and could have been addressed in theproceedings before Jagose J. There is a clear need for finality and Jim's remedy – ifindeed there is one – lies with his appeal to the Court of Appeal.[56] In concluding that the abuse of process doctrine applies here, I acknowledgethat some of Jim's cross claims, such as the costs arising from the proceedings beforeJagose J, or the delivery charges, could properly be regarded as issue estoppel and/orcause of action estoppel. However, I see no need to identify which particular estoppeldoctrine applies; my critical finding is that it would be an abuse of process to allowthe claims to be advanced. The principle of finality and the public policy rationale ofavoiding inconsistent decisions are clearly relevant and applicable.[57] For all of these reasons, the application to set aside the Bankruptcy Notice isrejected.Application to set aside the statutory demand[58] In accordance with the judgment of Moore J, Jim was unable to represent FlowControl, the applicant, in these proceedings.[59] Jim has not withdrawn the application to set aside the statutory demand,contrary to the indication he gave Moore J, which is recorded at [26] of his Honour'sjudgment.29[60] Jim now says that he wishes to challenge Moore J's judgment in the Court ofAppeal before deciding whether to withdraw the statutory demand. Since thatjudgment was interlocutory in nature, leave of this Court will be required for him todo so. I have been informed that Jim has since filed a notice of leave to appeal.29 Flow Control Limited v Il Forno Limited, above n 4.[61] Despite Moore J's judgment, Jim has not instructed counsel to represent FlowControl. Furthermore, no adjournment of these proceedings has been sought by FlowControl; Jim is of course in no position to do so.[62] It was open to Jim to instruct counsel to represent Flow Control. I note thatMoore J's judgment was delivered on 29 April 2021 and Flow Control was, throughoutthe entire proceedings before Jagose J, represented by counsel.[63] In these circumstances, I agree with the submission of Mr Lenihan that theseproceedings should be dismissed pursuant to r 10.8 of the High Court Rules. Theplaintiff/applicant, Flow Control, did not appear at the hearing. The claim is notadmitted and the defendant/respondent, Il Forno, is entitled to judgment dismissingthe proceedings.[64] McGechan on Procedure notes at HR10.8.02 that if the plaintiff's non-appearance is unexplained or deliberate, the defendant is entitled to judgmentdismissing the proceeding, save to the extent that the defendant has admitted allingredients of the claim.[65] In the circumstances here, I find that the plaintiff's non-appearance isdeliberate. Jim, as the controlling director of Flow Control, knew in advance of thehearing that he was unable to represent the company. He took no steps to instructcounsel and has not withdrawn the application. The decision of Moore J remains inforce; it has not been stayed.[66] In any event, and largely for the reasons already given in relation to thebankruptcy proceedings, I find that Flow Control has not satisfied the requirements ofs 290(4) of the Companies Act 1993. There is no substantial dispute as to whether ornot the debt is owing and Flow Control does not have a counterclaim, set-off or crossdemand, there being an absence of "clear and persuasive grounds" for any set-off orcounterclaim.30 The challenge to the statutory demand is based on essentially the samegrounds which Jim advances in relation to the Bankruptcy Notice. As I have already30 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].concluded above, in substance these claims are a collateral attack on the judgments ofJagose J. An attempt to re-litigate them would constitute an abuse of process.[67] I further note that the law is "crystal clear" that a company cannot establish agenuine dispute about the existence of the amount of debt to which a statutory demandrelates, where there is a judgment debt which, while it may be the subject of an appealto a higher court, has not been stayed so far as the operation of that judgment isconcerned.31[68] Neither of Jagose J's judgments have been stayed. Those judgments are to beregarded as final and capable of being enforced.32Result[69] The application by Jim to set aside the Bankruptcy Notice (CIV-2020-404-2196) is dismissed.[70] The application by Flow Control Ltd to set aside the statutory demand (CIV-2020-404-2409) is dismissed.[71] Flow Control Ltd has ten working days from the date of this judgment to payto Il Forno Ltd the sum of $89,974.36. In default, Il Forno Ltd may make anapplication to put Flow Control Ltd into liquidation on the ground that it is unable topay its debts.Costs[72] I order that Jim, as the judgment debtor in the bankruptcy proceedings,33 is topay costs to Il Forno, the judgment creditor, on a 2B basis plus disbursements.31 Cullen Group Ltd v Commissioner of Inland Revenue [2019] NZHC 3110, (2019) 24 PRNZ 703at [22]; Remote Camps Australia Pty Ltd v Hazeldine Pty Ltd [2012] FCA 130 at [25].32 Court of Appeal (Civil) Rules 2005, r 12; Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85(CA) at 87; Re Hair ex parte Schmidt [2014] NZHC 2476.33 CIV-2020-404-2196.[73] In relation to the statutory demand proceedings,34 Il Forno has sought non-party costs against Flow Control's director, Jim. Il Forno contends that any costsaward against Flow Control would be barren and that Jim procured Flow Control toengage in litigation when he knew that it could not meet the costs of doing so. Further,Jim personally commenced the statutory demand proceedings without counsel.[74] In addressing these issues, I have not received any submissions on costsdirectly from Flow Control. However, in accordance with a minute I issued at theconclusion of the hearing, Jim, in his personal capacity, has filed submissionsaddressing the issue of his personal liability in relation to the costs which wouldotherwise be met by Flow Control.[75] In opposition to a non-party costs award, Jim contends that the threshold of"exceptional" circumstances has not been made out. However, he does not deny thatFlow Control is in no financial position to meet a costs award.[76] I find that I should make a non-party costs award against Jim personally in thiscase. I acknowledge that a non-party costs award is to be regarded as "exceptional"35but the ultimate question is whether, in all the circumstances, it is fair to do so. In thiscase, Jim promoted and instigated the litigation through an insolvent company for hisown financial benefit and it is appropriate that he should be liable for costs since thelitigation has failed. Furthermore, as Moore J held, these proceedings are merely afollow-on from Jim's failure to accept the judgments of Jagose J in what islongstanding and intensive "intra-familial" litigation. Moore J also found that it wasplain that Jim views the litigation as something of a personal vendetta.[77] I reject Jim's submission that the costs should be categorised on a 1A basis.[78] I further find that Jim should pay costs in relation to the failed interlocutoryapplication before Moore J that he be able to represent Flow Control. In accordancewith r 14.2(1), costs should follow the event and in applying the other relevantprinciples set out in r 14.2 – including the fact that costs are to be predictable and34 CIV-2020-404-2409.35 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145 (PC) AT [25].expeditious – it is appropriate that costs be awarded in relation to the failedinterlocutory application.[79] For all these reasons, I order that Jim is to pay costs, as a non-party, to Il Forno,in proceedings CIV-2020-404-2409 on a 2B basis plus disbursements and inaccordance with the calculations set out at paragraph 3 of Mr Lenihan's memorandumdated 5 May 2021.__________________________Associate Judge P J Andrew