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Accident Compensation Cases

Saimei v McKay (HC, 01/10/98)

Judgment Text

RESERVED JUDGMENT OF PATERSON 
B J Paterson J
On 15 September 1996, the plaintiff (Mr Saimei)was knocked unconscious while participating in a boxing match in Auckland and, as a consequence, suffered serious injury In these proceedings he alleges negligence against several defendants. One of the defendants, Mr Todd, was adjudicated bankrupt on his own petition on 1 September 1997 This is an application under s 32 of the Insolvency Act 1967 by Mr Saimei for leave to continue with his action against Mr Todd 
The Proceedings 
The proceedings were commenced in November 1996 and there were then six defendants Mr Saimei has discontinued against three of those defendants. While the initial proceedings sought compensatory damages, the third amended statement of claim filed in March 1998 seeks from each of the three defendants the sum of $250,000 for exemplary damages While negligence is alleged, the claims for compensatory damages have been struck out under the provisions of s 14 of the Accident Rehabilitation and Compensation Insurance Act 1992. The allegations against each defendant are different Mr Todd is alleged to have been Mr Saimei's trainer and the allegations of negligence against him are that he failed to convey to the first defendant, the promoter of the match, the medical condition of Mr Saimei and a report of a doctor; failed to advise or make the pre-fight doctor aware of Mr Saimei's medical condition; failed to warn Mr Saimei in Pidgeon English not to feel obligated to fight if he was unwell, failed to warn Mr Saimei in Pidgeon English of the high risk of serious injury should he proceed to fight, and continued to coach Mr Saimei to fight regardless of his medical condition, regardless of the risk when Mr Todd knew or should have reasonably known that Mr Saimei would be seriously hurt if he was to fight 
The substantive hearing is due to commence on 12 October 1998 
The Judge who officiated at a pre trial conference on 9 October 1997 noted that he was advised from the Bar that Mr Todd had been adjudicated bankrupt. It appears that at least from that date all parties accepted that Mr Todd, because of his bankruptcy, was no longer an active participant in the proceedings. He has not been represented at subsequent conferences This application for leave to continue the proceedings was filed on 11 September 1998 approximately four weeks prior to the scheduled date of hearing and more than one year after Mr Todd was adjudicated bankrupt 
The Application 
The application seeks two orders, namely, leave to take a step in the proceeding after it has been set down for trial, and leave to continue the proceedings commenced against Mr Todd who has been adjudicated bankrupt The first order is sought under s 432 of the High Court Rules, and the second order under s 32 of the Insolvency Act 1967 It is the second application which is at the crux of Mr Saimei's application as his counsel accepted that the proceedings are currently stayed against him and cannot proceed unless leave is given under the provisions of the Insolvency Act. 
The basis of Mr Saimei's application is that new evidence which has recently come to light shows that Mr Todd is now receiving additional income which may be sufficient to satisfy a judgment made against him in these proceedings. Other matters raised in support of the application are allegations that Mr Todd has gone into voluntary bankruptcy to avoid paying any money to Mr Saimei and that this Court should not condone such conduct, and that it is in both the private interests of Mr Saimei and in the public interest that the order be made Mr Saimei's present interest is said to entitle him to his day in Court to determine the liability or otherwise of Mr Todd, and that he is entitled to this right because the New Zealand boxing community has not apologised to him nor accepted responsibility for their actions towards him It is said to be in the public interest because the boxing match of 15 September 1996, the injuries to Mr Saimei, and the lack of responsibility and care shown by the boxing community in New Zealand towards Mr Saimei, has been highly publicised in the news media Further, it is said that Mr Todd's conduct as trainer of Mr Saimei has brought discredit to the sport of boxing and it is therefore important that liability in these proceedings be determined It is said that if the allegations pleaded against Mr Todd are proven, it will establish liability against him and this will stop him from coaching boxers and exposing them to the risk of injury, or worse 
The Law 
No counsel was able to direct me to any previous New Zealand case law on the application of the provisions of s 32 of the Insolvency Act and no counsel referred to any overseas authority on similar statutory provisions Section 32 of the Insolvency Act reads — 
“Subject to section 55 of the Apprenticeship Act 1983, upon an adjudication being advertised, all proceedings to recover any debt provable in the bankruptcy shall be stayed, but the Court may, on application by any creditor or person interested, allow any proceedings commenced to be continued on such terms and conditions as it thinks just ”
The section has been considered by New Zealand Courts but not in contexts similar to the present application Section 285(3) of the United Kingdom Insolvency Act 1986 is not in identical terms to s 32 of the New Zealand Statute but is designed to have the same effect Principles which are applicable in considering the exercise of the discretion under that section were considered in Bristol & West Building Society v Trustee of the Property of Back1
| X |Footnote: 1
[1998] 1 BCLC 485 (Ch D). 
In that case the Judge summarised a series of principles relevant to the exercise of the discretion and relied on company liquidation cases in Australia2
| X |Footnote: 2
Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ASCR 329 and Ex parte Walker (1982) 6 ACLR 423
There is comparable case law in this country which considered the predecessor to s 248(1)(c) of the Companies Act 1993, the provision preventing the continuation of legal proceedings against a company placed in liquidation unless the liquidator or this Court otherwise orders. From these analogous statutory provisions, and the manner in which they have been interpreted, it is possible, in my view, to formulate the relevant principles to be applied on an application for leave to continue under s 32 of the Insolvency Act While not necessarily an exhaustive list, the following principles are applicable.— 
(a)
The Court has a discretion to do what is right and fair according to the circumstances of the case, 
(b)
When a person is adjudicated bankrupt, his assets are to be administered in an orderly fashion for the benefit of all his creditors and a particular creditor should not be able to obtain an advantage by bringing proceedings against him. There should thus be no prejudice to other creditors or to the ordinary administration of the bankruptcy if the action were to proceed; 
(c)
The claim should not be clearly unsustainable but the Court will not investigate the merits of the claim; 
(d)
The claim should normally be of a type which is more suitably determined by action rather than by lodging a proof of debt in the bankruptcy If the claim could just as easily be dealt with in the bankruptcy, leave is not likely to be granted, 
(e)
Leave is more likely to be granted where there is an insurance company standing behind the defendant to pay any judgment debts the plaintiff might obtain, because if it is successful, such an action is unlikely to prejudice the creditors of the defendant, 
(f)
It may be desirable to impose a condition that the plaintiff will not enforce any judgment against the defendant without the leave of the Court to ensure that the Official Assignee retains ultimate control, 
(g)
Mere delay itself in applying for leave will not prevent leave being granted Leave is not to be withheld simply and solely as a punishment; 
(h)
Leave may be granted after the expiry of the relevant period of limitation to continue an action commenced within the limitation period without the leave of the Court 
There is no direct reference in the principles extracted from the authorities which suggests that leave should not be granted if there is no prospect of the applicant benefiting financially if leave were to be granted However, in my view, this is also a relevant matter when considering what is right and fair according to the circumstances of the case In this case, the reason given for making the application is that Mr Todd may be in a position to make a payment to Mr Saimei if he succeeds in his action A bankrupt's earnings, earned by his personal exertions after his adjudication, pass to the Official Assignee, pursuant to s 42 of the Insolvency Act, which must be read subject to the common-law rule that the bankrupt is entitled to reserve from his earnings so much thereof as is necessary reasonably to maintain himself, his wife and his family.3
| X |Footnote: 3
Re Burney (A bankrupt), Ex parte Official Assignee [1995] NZLR 1071
If there is surplus income available in the future, the Official Assignee is entitled to claim that surplus for the benefit of all creditors. 
If there is no surplus income and the bankrupt, if leave is given to continue with the proceeding, obtains legal aid to defend the action, a plaintiff even if he or she succeeds, will not obtain any benefit There will be an inevitable claim on the legal aid funds met by the taxpayer This is a matter which, in my view, is relevant to the exercise of the discretion 
The Facts 
In September 1997, approximately two weeks after Mr Todd filed his own petition, the Official Assignee sent a notice to his creditors It stated that preliminary enquiries into the affairs of Mr Todd had indicated that a meeting of creditors was not warranted. However, creditors were advised that if they considered a meeting would benefit the administration of Mr Todd's bankruptcy, any creditor could contact the Official Assignee in writing within fourteen days indicating the matters he or she proposed to raise at the meeting The notice stated that, on the information then available, no dividend will be paid and there was no need to lodge a proof of debt In the unlikely event funds became available, a proof of debt form would be sent to creditors The information provided by the bankrupt disclosed that he owed $25,100 to eight creditors. These debts arose from Mr Todd being made redundant from his job as the Auckland boxing coach as a result of a publicised Court case. Because of lack of wages, Mr Todd was unable to service his debts as they became due. The notice stated that he was then currently unemployed and that most of Mr Todd's wages would go towards his living costs 
The further evidence upon which Mr Saimei seeks to rely is an affidavit sworn by a gymnasium manager on 14 September 1998 It was the belief of this gymnasium manager that if judgment is obtained against Mr Todd, he will be able to satisfy the judgment despite the fact that he is currently an undischarged bankrupt The grounds for his belief are that Mr Todd is now working as a resident coach at another gymnasium which is known in boxing circles as “Todd's Gym”. It stated that Mr Todd earned a living in this gymnasium both coaching boxers and conducting boxing training sessions for members. The affidavit gives no details of the proposed income and does not indicate whether the income would be more than Mr Todd is able to retain under his common-law right already referred to The affidavit then goes on to make some general assertions which are not supported by evidence and which cannot be accepted by evidence in this Court. One such allegation is that Mr Todd went into bankruptcy to avoid having to face these proceedings and that most people in boxing circles have this belief This evidence is hearsay and does not set out the grounds for the deponent's belief There is then a statement, which has been fortified in submissions, to the effect that if Mr Todd is found liable, it would be for the benefit of sport to keep him out of boxing and prevent him forcing fighters to fight who are not fit This statement of opinion is irrelevant to the application and if there is any substance in the wish to keep Mr Todd out of boxing, there must be other appropriate ways to investigate whether this is desirable and, if so, possible As noted, the allegations made by Mr Saimei against Mr Todd are independent and distinct from the allegations against the other defendants. Mr Todd has sworn two affidavits in opposition and confirms that he is involved in training boxers but says that he does not earn a living from it At the time of his first affidavit he was receiving a full unemployment benefit of $226 per week including an accommodation allowance His evidence is that he was only involved in amateur boxing and that the boxers he trains come from the lower end of the economic spectrum He says that the Official Assignee was aware of the situation. In his second affidavit, Mr Todd exhibited a letter dated 21 September 1998 from the Income Support Service which makes it clear that that Service is aware that Mr Todd is receiving income on a part time basis Consequently, his income support payments are to be reassessed. Mr Todd's evidence, albeit hearsay, is that he understands from the advice he has received that his benefit is likely to be reduced by $14 per week as a result of his earnings, an average between $50 and $80 per week There is no credible evidence before this Court that Mr Todd is earning income from which any payment could be made if Mr Saimei is successful in his claim The new evidence upon which Mr Saimei has based this application is far from persuasive 
Counsel for Mr Saimei in evidence submitted that Mr Todd's father had recently died and, consequently, Mr Todd may benefit from his estate. There was no evidence before the Court suggesting that Mr Todd was in any way likely to benefit from an estate and this is not a matter which I intend to take into account. Counsel for Mr Todd did advise from the Bar that Mr Todd's father died penniless and he offered to file an affidavit to verify this I do not consider this necessary as in the unlikely event of Mr Todd benefiting from his father's estate, the Official Assignee will no doubt take steps to recover any money for the benefit of creditors In such circumstances, Mr Saimei could then prove in the bankruptcy, as the Official Assignee has indicated, that if funds come to hand creditors would be given an opportunity to prove. While Mr Saimei's claim is one more appropriately to be determined by the Court rather than in the proof procedure of a bankruptcy, if funds do come to hand it would not then be too late for there to be a proof filed or for a further application to be made for leave to continue these proceedings 
Application of law to the facts 
It was submitted on behalf of Mr Todd that Mr Saimei has a very weak claim against him It is not appropriate for the Court on this type of application to assess the strength of the claim The amount claimed for exemplary damages is clearly excessive but whether or not this is an appropriate case for exemplary damages should not be determined on this type of application The prevailing factor in considering the various principles to be applied is, in my view, the pointlessness of giving leave to proceed. On the evidence before the Court there is no prospect of Mr Todd being able to contribute to any judgment against him. If he does have funds, there are other creditors who would have an equal right to share in those funds pari passu with any claim which Mr Saimei may establish Mr Todd would undoubtedly be eligible for legal aid. This Court should not, in my view, be party to allowing proceedings to proceed where the plaintiff cannot benefit from them financially but the taxpayer is forced to meet the cost of the proceedings. While delay in itself is not a sufficient factor to decline leave, it is a factor which, when considered with the pointlessness of the proceeding continuing, is relevant It was accepted by all counsel that if leave were to be granted, it would be necessary to adjourn the fixture which is due to commence on 12 October This would inevitably inconvenience all other parties and add to their costs Parties should not be inconvenienced by an order which is pointless 
The matters of public interest raised are not factors which I take into account as, in my view, they are irrelevant. Public interest in this case mitigates against giving the leave Mr Saimei's private interests will not benefit because of Mr Todd's financial situation Mr Todd denies that he filed his own petition to avoid the consequences of these proceedings He avers that he was entirely unaware that the proceedings would be stayed upon bankruptcy until the Official Assignee's office explained that to him. There are obviously strong undertones among various members of the boxing world which are surfacing in this action. 
Those undertones should not be fuelled at the taxpayers' cost when the outcome will be without financial benefit to Mr Saimei. 
Decision 
For the reasons given, the application is declined. 
Costs are reserved 


[1998] 1 BCLC 485 (Ch D). 
Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ASCR 329 and Ex parte Walker (1982) 6 ACLR 423
Re Burney (A bankrupt), Ex parte Official Assignee [1995] NZLR 1071

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