LOGAN v WILTON [2017] NZHC 3273

LOGAN v WILTON [2017] NZHC 3273 [21 December 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-002206[2017] NZHC 3273BETWEEN TONY GRANT LOGANPlaintiffAND DIANNE KATHRYN WILTONDefendantOn the papers: 4 December 2017Appearances: Plaintiff in PersonP Stevenson for the DefendantJudgment: 21 December 2017JUDGMENT OF ASSOCIATE JUDGE SARGISSONThis judgment was delivered by me on 21 December 2017 at 10.30 a.m.pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate.......................................Solicitors:Complete Legal Ltd, AucklandP Stevenson, AucklandIntroduction[1] This judgment deals with the outstanding costs issues following proceedingsbetween Ms Wilton and Mr Logan.[2] On 27 April 2017, I made an order on Ms Wilton's application setting aside abankruptcy notice served on her by Mr Logan. Mr Logan had initially opposed theapplication and filed documents in opposition but ultimately the underlying disputewas resolved and the order setting aside the bankruptcy notice was sought jointly.[3] Both parties contend they are entitled to costs. Ms Wilton seeks a contributionto her costs of $5,686. Mr Logan seeks compensation towards the costs he paid legalcounsel up until April 2017 (at which point he gave us his legal representation).[4] Notwithstanding the presumption in High Court Rule 14.2(1)(a) that theunsuccessful party pay the costs of the successful, in the unusual circumstances of thiscase justice is best served by ordering that costs lie where they fall.[5] My reasons follow.BackgroundEvents prior to bankruptcy notice[6] The bankruptcy notice was issued by the Court on 5 September 2016 atMr Logan's request. It emerged out of a long-running dispute about relationshipproperty which was played out in litigation in the Family Court.[7] The bankruptcy notice was based on two orders of the Family Court:(a) On 16 November 2014, the Court awarded Mr Logan various sums forhis share in certain relationship property, but subject to adjustmentsallowed in Ms Wilton's favour. The precise sum to be paid byMs Wilton was left for the parties to calculate. They had leave to returnto court should they need to the Court's further intervention.(b) On 13 August 2015, Ms Wilton was ordered to pay costs to Mr Loganof $16,950.[8] After the first order was made the parties' lawyers engaged for someconsiderable time over the question of what precise adjustments Ms Wilton wasentitled to. Common ground escaped them.[9] Mr Logan and his lawyers warned Ms Wilton and her lawyers that there wouldbe costs consequences if Mr Logan had to resort to further ligation to secure paymentof what was due to him. Mr Logan calculated he was entitled to an overall sum of$59,726.90 (allowing for the adjustments and the costs order).[10] Nothing was paid towards either order and on 6 April 2016, Mr Logan soughtand obtained from the Family Court a certificate of judgment for $60,748.90 (basedon the assessed $59,726.90, plus interest of $972 and scale costs). Ms Wilton did notagree with these sums and made clear that she would not give her agreement to therelease of any part the relationship monies that were held in a solicitor's trust accountfor herself and Mr Logan. Nor was she happy about the costs order and did not payit. Eventually, she nominated a sum that she would settle for. That did not suitMr Logan. He wanted all that he believed due to him.[11] Time passed. The deadlock continued. Eventually, Mr Logan began tothreaten bankruptcy proceedings. But he still did not receive any payment towards theFamily Court's orders. He requested the Registrar of this court to approve the issueof a bankruptcy notice based on the certificate of judgment against Ms Wilton. Thenotice was issued on 5 September 2016.Events after bankruptcy notice[12] Once served with the bankruptcy notice Ms Wilton swung into action:(a) She filed and served an application to set aside the bankruptcy noticewithin the time allowed.(b) She paid the Court ordered costs of $16,950; and rightly so, as she wasobliged to pay them within a reasonable time of the Court's order of13 August 2015. She also paid a sum to cover any interest she mightbe liable for on the costs order.[13] The primary ground upon which Ms Wilton challenged the bankruptcy noticerelated to the adjustments she was entitled to under the Family Court's orders of16 November 2014, resulting (she says) in an error in the certificate of judgment of6 April 2016.[14] The first time Ms Wilton's application came before the Court was on20 October 2016. It was adjourned by consent to allow Ms Wilton time to apply tothe Family Court for an order to vacate or amend the certificate of judgment. In aminute I issued I observed:[7] Without wishing to say anything that is determinative of the mattersin issue in this proceeding, I make this observation – from what I have heardabout the underlying dispute, it concerns whether or not there has been anerror in the quantum that the judgment debtor has been ordered by the FamilyCourt to pay to the judgment creditor. It would appear however that there is asignificant sum that is not in dispute. If that is the case then I wonder if thereis any reason why she should not now pay at least that sum, pending theresolution of this proceeding.[15] The setting aside application came back before the Court on 1 March 2017 and27 April 2017. By the second occasion (by which point Mr Logan had becomeself-represented) both parties had come to see the sense in resolving their disputewithout the need to wait for the intervention of the Family Court (which had yet toallocate a case management conference). But the issue of costs was a sticking point;and so, at my suggestion; they agreed that the costs would be dealt with by the court.[16] They asked for an order setting aside the bankruptcy notice, and proposedconsent orders for the division of the monies that had been held in trust for thempending the resolution of the disputed adjustments. I granted those orders accordingly.Assessment[17] I begin with the presumption in High Court Rule 14.2(1)(a) which relevantlyprovides that the unsuccessful party is to pay costs to the successful party.[18] Success is generally determined on the outcome determined by the court; butthe presumption applies equally where the parties have agreed on the setting aside ofthe notice. In those circumstances, of course, the court has not had the opportunity todecide the actual merits of the case; and indeed, it will be wary of speculating uponthem.1[19] Ms Wilton 'succeeded' insofar as the bankruptcy notice was set aside. She alsosays the deduction the parties eventually agreed to by consent were exactly the amountshe had proposed, rather than the lesser deduction posited by Mr Logan. However,given that she had refused until the eleventh hour to specify the value of the deductionshe believed she was entitled to, Mr Logan had no opportunity to agree to her terms,or even negotiate with her in earnest.[20] Nonetheless, the starting point, therefore, is that Ms Wilton is the successfulparty for the purposes of r 14.2(1)(a) and as such is entitled to costs. Still, costs remainat the discretion of the court: r 14.1. The court will look to all the circumstances of thecase to determine what justice requires on the particular facts of the case.[21] On the present facts, various considerations weigh against upholding the r14.2(1)(a) presumption and instead awarding costs to Mr Logan. In brief, they are asfollows:(a) She withheld for some two and a half years the $16,950 (plus interest)of court ordered costs without any justification;(b) She also withheld payment of the full amount she was ordered to payMr Logan for his share in certain relationship property, on the basis thatthe value of the adjustments was yet unresolved. The sums in dispute1 North Shore City Council v Local Government Commission (1995) 9 PRNZ 182.were comparatively very modest. She could and should have paid thevast bulk of amount awarded to him that was not under dispute.(c) She stalled and delayed the resolution of the dispute without any goodjustification. For instance: Despite relying on the disputed adjustments,she failed for a long time to specify the value of the deductions shebelieved she was entitled to. Even after my November minute, quotedabove, encouraging her to pay the vast bulk of the amount owing MrLogan, it still took her another five months before she did so. A finalexample is her delay of six months after the service of the bankruptcynotice before she took steps to refer the matter back to the Family Court.[22] Ordinarily, these factors in combination would warrant some compensationbeing allowed for Mr Logan's costs. However, one striking feature of this case weighsstrongly in the other direction:(a) Mr Logan had full security for the claimed debt. The $60,000 held intrust account pending resolution of the parties' dispute was sufficient tocover both the cost award and the monies owed to him for his share incertain relationship property. In those circumstances, the bankruptcyproceedings were not a legitimate debt collection exercise, nor a meansof testing Ms Wilton's solvency. They were quite patently a means ofcajoling and coercing Ms Wilton into paying.(b) Mr Logan was fully aware that Ms Wilton was able, though unwilling,to pay the debts. In those circumstances the use of the bankruptcymechanism was inappropriate and ill advised. More appropriatemethods of enforcing the debt were available to him. Mostappropriately, it would have been simple enough for him to refer theminor sum in dispute back to the Family Court for a further orderpursuant to the leave given to the parties, or he could have taken stepsagainst the stakeholder who held monies in trust against the FamilyCourt's order of November 2014.[23] I therefore reject his submission that he was 'forced' to incur almost $10,000in legal costs in the bankruptcy proceeding to 'collect' what should never have beenwithheld. In these circumstances, I am reluctant to award Mr Logan costs.[24] In sum, Ms Wilton's conduct left Mr Logan in a position where interventionwas necessary. It would be unfair to allow Ms Wilton to benefit from the way shestalled and stymied resolution of the dispute for so long, keeping Mr Logan in the coldwithout the monies he was indisputably owed. Assuming the dispute over thededuction was genuine, this did not justify her withholding the bulk of the firstjudgment debt and certainly not the Court-ordered costs.[25] But equally, the court cannot allow Mr Logan to benefit from his inappropriateuse of the bankruptcy procedure to force Ms Wilton to pay (with the threat of personalbankruptcy hanging over her).Result[26] In the unique circumstances of this case, justice is best served by allowing coststo lie where the fall.[27] I order accordingly._____________________Associate Judge Sargisson