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Garth Bowkett Paterson v/s Lepionka & Company Investments Limited & Others

    CA Nos. 521 of 2020 & 40 of 2021

    Decided On, 03 August 2021

    At, Court of Appeal of New Zealand

    By, THE HONOURABLE MR. JUSTICE CLIFFORD & THE HONOURABLE MR. JUSTICE GILBERT

    For the Appellant: In person. For the Respondents: M.G. Colson, S.J. Leslie, Advocates.



Judgment Text

REASONS OF THE COURT

(Given by Gilbert J)

Table of contents

Introduction [1]

Background [7]

The development [8]

The first mortgagee proceeding [11]

Mr Paterson adjudicated bankrupt [12]

First application for annulment of bankruptcy [14]

Official Assignee disclaims rights [15]

The Liability judgment [16]

Appeal against Liability judgment [18]

Mr Paterson lodges a caveat over the property [19]

Second application for annulment of bankruptcy [23]

Settlement [24]

Mr Paterson applies to be joined in GLW’s appeal [25]

Further caveats lodged by Mr Paterson’s interests [26]

The second mortgagee proceeding [30]

Mr Paterson’s further attempt to appeal the Liability judgment [31]

The malicious prosecution proceeding [32]

Strike out judgment [33]

Appeal against Strike out judgment [38]

Second bankruptcy — Adjudication judgment [41]

Decision

CA521/2020 [42]

CA40/2021 [50]

Mr Paterson’s interlocutory application [53]

Costs [54]

Result [55]

Introduction

[1] Garth Paterson’s appeal in CA521/2020 is against a judgment delivered by Doogue J on 26 August 2020 striking out two sets of proceedings he commenced in the High Court at Napier (the Strike out judgment).[1] The first of these proceedings (which we will refer to as the second mortgagee proceeding)[2] was struck out on the basis it was precluded by the doctrine of res judicata and therefore an abuse of the Court’s process.[3] The second proceeding (which we will refer to as the malicious prosecution proceeding)[4] was struck out on the basis that the statement of claim disclosed no reasonably arguable cause of action.[5] The Judge also made an extended order under s 166(4) of the Senior Courts Act 2016 restricting Mr Paterson from commencing or continuing any civil proceeding for a period of three years relating in any way to specified land in Hawke’s Bay.[6]

[2] Mr Paterson’s appeal in CA40/2021 is against a judgment delivered by Associate Judge Johnston on 16 December 2020 adjudicating Mr Paterson bankrupt (the Adjudication judgment).[7]

[3] The respondents now apply to strike out both appeals on the grounds they are vexatious and an abuse of process.

[4] Mr Paterson opposes the application and applies for orders:

(a) suspending or staying his bankruptcy pending determination of his appeal against the Adjudication judgment;

(b) directing that the appeal against the Adjudication judgment be heard first;

(c) staying the appeal against the Strike out judgment pending determination of the appeal against the Adjudication judgment; and

(d) convicting and fining Lepionka & Company Investments Ltd (LCIL) and its director, Stefan Lepionka, for offences pursuant to s 163(4) of the Property Law Act 2007 (the PLA).

[5] These orders are sought on the basis there has been a miscarriage of justice and LCIL and Mr Lepionka have intentionally breached their statutory duties under s 163(4) of the PLA.

[6] The two applications are now before us for determination on the papers.

Background

[7] The parties to these proceedings and their associated interests have been engaged in extensive litigation over the last six years arising out of a property development in Hawke’s Bay. The full details are collected in the numerous judgments that have resulted, some of which are referred to in this judgment. It is sufficient for present purposes to give only a brief summary of this background.

The development

[8] In 2009, GLW Group Ltd (GLW)[8] (now in liquidation), a company controlled by Mr Paterson and of which he was the director, acquired a 24-hectare block of land on the banks of the Tukituki River in the Hawke’s Bay (the property) for the purposes of carrying out a development involving the subdivision and sale of a number of lifestyle blocks. The intention was for one of these blocks to be retained for the benefit of Mr Paterson’s family. The purchase was partly funded with borrowing from Westpac Bank which took a registered first mortgage over the property as security.

[9] GLW encountered difficulties, partly because it had assumed obligations to the purchasers of proposed lots 1 and 2 in 2012 that were inconsistent with rights subsequently conferred under agreements entered into in 2014 with Mr Lepionka’s interests for the sale of various other proposed lots in the subdivision (the Lepionka agreements). As a result, caveats were lodged by the purchasers of lots 1 and 2 preventing settlement of the Lepionka agreements. GLW ran out of funds and defaulted on its obligations to Westpac and another financier, AFI Management Pty Ltd (AFI), which had also provided funding for the development and held an unregistered second mortgage. Westpac issued a default notice under s 119 of the PLA in early 2015.

[10] To protect his interests, Mr Lepionka formed LCIL which took an assignment from Westpac of GLW’s debt and securities. LCIL took possession of the property as mortgagee in early April 2015. LCIL, as mortgagee, adopted the Lepionka agreements in accordance with s 179 of the PLA. GLW then sought to redeem the mortgage but LCIL refused to allow this on the basis it had already exercised its power of sale by adopting the Lepionka agreements.

The first mortgagee proceeding

[11] In September 2015, GLW and Mr Paterson filed claims in the High Court at Auckland against LCIL, the Lepionka purchasers and Mr Lepionka claiming, amongst other things, that LCIL had breached its statutory and equitable duties as mortgagee in adopting the Lepionka agreements and refusing to allow GLW to redeem the first mortgage (we will refer to this proceeding as the first mortgagee proceeding).[9]

Mr Paterson adjudicated bankrupt

[12] Mr Paterson was bankrupted in Australia on 24 September 2015 on the application of the Deputy Commissioner of Taxation. Mr Paterson ceased as director of GLW the following day and his ex-wife, Elizabeth O’Neil, replaced him as the sole director of GLW.

[13] On 5 April 2016, LCIL obtained summary judgment against Mr Paterson in the sum of approximately $3.8 million being the amount owing under his personal guarantee of the mortgage. That application was not opposed. On the same day, Mr Paterson was adjudicated bankrupt for non-payment of costs awarded by the High Court to LCIL. That application was also not opposed.

First application for annulment of bankruptcy

[14] Mr Paterson subsequently applied to annul his bankruptcy. This application was declined by Associate Judge Osborne on 16 June 2016.[10]

Official Assignee disclaims rights

[15] In January 2017, the Official Assignee disclaimed all rights, interests and claims that Mr Paterson had as a plaintiff in the first mortgagee proceeding. Mr Paterson then applied to have the disclaimed causes of action vested in him pursuant to s 119 of the Insolvency Act 2006. However, that application was declined by Fitzgerald J in May 2017.[11]

The Liability judgment

[16] GLW’s claims in the first mortgagee proceeding were heard by Fitzgerald J in July and August 2017 together with similar claims brought by AFI against LCIL.[12] Ms O’Neil was at that time the sole director and shareholder of GLW. Mr Paterson was the only witness called by GLW to give evidence at the trial.

[17] In a judgment delivered on 14 December 2017 (the Liability judgment), Fitzgerald J dismissed most of GLW’s claims but found that LCIL had breached its equitable duties as mortgagee by exercising its power of sale for an improper purpose and had failed to take reasonable precautions to obtain the best price reasonably obtainable at the time of sale.[13] The Judge declined to set aside the Lepionka agreements with the result that GLW’s remedy would be confined to damages.[14] The Judge found that whether LCIL had breached its statutory duty of reasonable care in exercising its power of sale under s 176 of the PLA would depend on the final price achieved by LCIL on the sale of the property as compared with the best price reasonably obtainable in April 2015 when it adopted the Lepionka agreements.[15] A final assessment of damages would be made after completion of the subdivision.[16]

Appeal against Liability judgment

[18] GLW filed a notice of appeal against the Liability judgment on 1 February 2018 but Mr Paterson (who was obviously not entitled to any relief in the circumstances we have described) did not.

Mr Paterson lodges a caveat over the property

[19] The previous day, on 31 January 2018, Mr Paterson lodged a caveat over the property claiming an interest pursuant to “a cestui que trust agreement dated 16 November 2016 between the registered proprietor [GLW] and [Mr Paterson]”. This was some 19 months after LCIL had taken possession on the property as mortgagee in April 2015. LCIL filed an application under s 143 of the Land Transfer Act 1952 for removal of the caveat and for an order restraining Mr Paterson, GLW, Ms O’Neil and Nadia Dapas (Mr Paterson’s current partner) from lodging any further caveat against the title to the property without leave of the Court. The application named Mr Paterson as first respondent in his capacity as trustee of an unknown trust, GLW as second respondent, Mr Paterson in his personal capacity as third respondent, Ms O’Neil as fourth respondent and Ms Dapas as fifth respondent. The notice of opposition filed on behalf of Mr Paterson (in his personal capacity and as a trustee) stated that he “does not claim any caveatable interest in the property and undertakes not to personally lodge any caveat”.[17] In the same notice of opposition, GLW claimed it had a caveatable interest in the property and contended that “the caveat has therefore been properly lodged”.[18] This was despite the caveat being lodged to protect Mr Paterson’s asserted interest in the property, not any interest by GLW.

[20] Despite taking that position in the notice of opposition, the submissions presented at the hearing were, as noted by Fitzgerald J, “the complete opposite”.[19] Counsel advised that GLW consented to the order sought restraining it from lodging any caveat against the title to the property. These instructions had been provided by Ms O’Neil as the current director of GLW. Mr Paterson appeared at the hearing. He asserted a caveatable interest arising under the Lepionka agreements which contained provisions relating to the “GLW fishing hut”.[20]

[21] Fitzgerald J was satisfied it was appropriate to make an order removing the caveat and an order preventing Mr Paterson from lodging any further caveat over the property. The Judge made the following pertinent observations in her judgment delivered on 6 July 2018 as to why these orders were justified:

[47] ... Mr Paterson did not adduce any evidence of any alleged trust between himself and other members of his family. Indeed, and as noted earlier, in his written submissions, Mr Paterson expressly disclaimed any such trust, and confirmed that he simply appeared as a “representative” of the Garth Paterson family. Mr Paterson’s suggestion that he holds contractual rights arising from the [Lepionka agreements] on trust for his family accordingly appears to be an attempt to avoid the consequences of his own bankruptcy.

...

[52] ... I record that I do not consider Mr Paterson, or individual members of his family, or their guests, have a reasonably arguable case for the claimed caveatable interest in any event.

...

[66] I have carefully considered [whether to make a restraining order] and have reached the conclusion that such an order against Mr Paterson is appropriate.

[67] First, Mr Paterson’s approach and conduct in relation to this particular caveat is concerning. As will be evident from this judgment, he has taken differing positions as to the basis upon which he lodged the caveat, and relied on a variety of documents and alleged trusts to support it, without proper evidence of such matters.

[68] Second, I remain concerned at Mr Paterson’s actions as an undischarged bankrupt, both in taking steps to issue a caveat and then appearing on the subsequent application to remove it. This concern reflects more general concerns I expressed in a separate hearing in these proceedings, as to Mr Paterson’s continuing involvement in GLW’s activities and decisions. His claim to hold contractual rights on trust for his family is hollow, unsupported by evidence. I conclude it was a device to enable him to continue to pursue these matters personally, despite his status as undischarged bankrupt. If members of Mr Paterson’s family properly considered they had a caveatable interest in the Land, it was open to them to have taken legal advice on those matters and lodged a caveat in their own name, if considered appropriate.

[69] Third, Mr Paterson was responsible for another caveat improperly lodged over the Land, in that case, by a company named Horseshoe Bend Hawkes Bay Ltd (“HBHB”). Those proceedings were determined in September 2016 by Associate Judge Sargisson. She found there to be “no room for the slightest inference that the sales contracts referred to in [HBHB’s] caveat afford [HBHB] the interest in Lot 7 that its caveat claims.” The Judge accordingly ordered that the caveat be removed. Despite Mr Paterson’s evidence in the main proceedings to the contrary, I found that that caveat had been lodged to frustrate the settlement of the sale of Lot 2 in the Land. Mr Paterson now accepts that he was responsible for causing HBHB to lodge that caveat (though continues to maintain it was lodged for genuine reasons).

[70] Fourth, Mr Paterson’s actions (and those of others associated with him, for example, in the HBHB proceedings) has undoubtedly caused loss to LCIL, such as the legal costs and expenses involved in dealing with these issues. This is exacerbated by irregularities as to appearances, and confusing and inconsistent approaches being taken in the materials filed in support of the caveat. Any award of damages, or costs against Mr Paterson personally (even on an increased or indemnity basis), is unlikely to be of practical benefit given his present status. Further, the Court’s scarce resources are diverted unnecessarily from other litigants.

(Emphasis added, footnotes omitted.)

[22] The Judge accordingly made an order restraining Mr Paterson from lodging any further caveat against the property without prior leave of the Court.[21] An order in these terms was made by consent against GLW.[22] The Judge accepted undertakings from Ms O’Neil and Ms Dapas not to lodge caveats against the property in any capacity without leave of the Court.[23]

Second application for annulment of bankruptcy

[23] In July 2018, Mr Paterson made a second application for annulment of his bankruptcy. This was in almost exactly the same terms as his first application that had been rejected by Associate Judge Osborne in June 2016. This application was declined by Associate Judge Johnston in November 2018.[24] Mr Paterson’s appeal against that judgment was dismissed by this Court in November 2019.[25]

Settlement

[24] GLW was placed into voluntary liquidation in July 2018. LCIL subsequently entered into comprehensive settlements with AFI in August 2018 and with GLW (through its liquidator) in December 2018. As part of the settlement, GLW discontinued its claims against LCIL in the High Court and abandoned its appeal to this Court against the Liability judgment. That should have been the end of the matter. However, Mr Paterson does not accept finality and has continued to press the same grievances against the Lepionka interests ever since.

Mr Paterson applies to be joined in GLW’s appeal

[25] On 20 December 2018, one day before GLW filed its notice of abandonment of the appeal from the Liability judgment, Mr Paterson filed a memorandum seeking to be added as an appellant in the appeal. LW354 Ltd (LW354), a company incorporated on 13 November 2018 with Ms O’Neil as its sole director and shareholder, later filed a memorandum also seeking to be added as an appellant in the appeal. This Court declined these applications on 28 February 2019.[26]

Further caveats lodged by Mr Paterson’s interests

[26] In November 2018, Naldapat Ltd (Naldapat) lodged a caveat claiming an interest in the property under a purported agreement with GLW on 11 May 2018. Ms Dapas was the sole shareholder of Naldapat and she and Vaughan Bowkett, Mr Paterson’s cousin, were its directors. Naldapat withdrew this caveat after LCIL applied to the High Court for its removal.

[27] In the meantime, LW354 also lodged a caveat claiming an interest in the property as trustee, having purportedly assumed this role on 13 November 2018 following the retirement of Naldapat as trustee. The interest claimed under the caveat was described as follows:[27]

The abovenamed caveator claims an interest in the land contained in the above certificate of title 716653 as beneficial and/or equitable owner of the freehold estate and the fee simple, pursuant to a cestui que trust agreement as per the deed of appointment and retirement of trustee dated 13 November 2018 as successor pursuant to a deed of appointment of trustee dated 20 July [2018] between the registered owner [GLW] and [Naldapat].

[28] Associate Judge Bell made an oral order removing LW354’s caveat at the conclusion of the hearing of LCIL’s application on 27 June 2019 for reasons set out in his judgment subsequently delivered on 15 July 2019.[28] The caveat had been lodged in breach of the restraining order made by Fitzgerald J and the undertaking Ms O’Neil had given to the Court.[29] The Associate Judge was satisfied that the caveat was vexatious and an abuse of process and Mr Paterson was clearly behind the lodging of it.[30] LW354 filed an appeal against this judgment but it has now been abandoned.

[29] Immediately following the announcement of the order to remove LW354’s caveat, a further caveat was lodged against the property by 47 Fairfax Pty Ltd, another company associated with Mr Paterson. Ms Dapas was a director of this company. Ms Dapas also sought to register a notice of claim under the Property (Relationships) Act 1976 against the title to the property.

The second mortgagee proceeding

[30] In November 2019, Mr Paterson commenced the second mortgagee proceeding in the High Court at Napier. He claimed to be a trustee of the Garth Paterson Family Trust and asserted that this trust has held an unregistered interest in the property since 15 September 2009 pursuant to an agreement to mortgage with GLW. Mr Paterson alleged that GLW took title to the property in 2009 as trustee for Mr Paterson as bare trustee for his two sons. In his capacity as trustee, he advanced eight causes of action claiming that LCIL breached various duties in the exercise of its powers as mortgagee, including an alleged breach of s 176 of the PLA by failing to take reasonable care to obtain the best price reasonably obtainable. In August 2020, Doogue J struck out the second mortgagee proceeding on the basis the claims were the same, or sufficiently similar, to those pursued in the first mortgagee proceeding and dealt with by Fitzgerald J in the Liability judgment.[31] Accordingly, Doogue J found the second mortgagee proceeding was barred by the principles of res judicata.[32]

Mr Paterson’s further attempt to appeal the Liability judgment

[31] In the meantime, in April 2020, Mr Paterson applied for an extension of time to appeal against the Liability judgment. Brown J directed that the papers be returned to Mr Paterson because he had no standing to appeal.[33]

The malicious prosecution proceeding

[32] In June 2020, Mr Paterson, in his personal capacity, commenced the malicious prosecution proceeding against LCIL. He alleged that LCIL’s application to adjudicate him bankrupt in April 2016 was a malicious prosecution and an abuse of process. He added a third cause of action against LCIL for “dishonest assistance”, asserting that LCIL was a trustee in respect of funds received following sales of parts of the property and had breached its fiduciary obligations in that capacity.

Strike out judgment

[33] Doogue J struck out the malicious prosecution and abuse of process claims on the basis these claims disclosed no reasonably arguable cause of action and were clearly untenable.[34] Mr Paterson had not opposed the bankruptcy application. Nor did he appeal against it. He made two unsuccessful applications to annul the bankruptcy and the second of these decisions was upheld on appeal to this Court.[35]

[34] The Judge struck out the third cause of action which related to LCIL’s obligations as mortgagee in possession on the basis this claim was barred by the principles of res judicata following the Liability judgment and that claim was therefore an abuse of the Court’s process.[36]

[35] The Judge then turned to consider the application by the Lepionka interests for a barring order under s 166 of the Senior Courts Act. She found the second mortgagee proceeding and the malicious prosecution proceeding were totally without merit in terms of s 167 of the Act.[37] The Judge also found that the second application for annulment of bankruptcy was totally without merit.[38] Three other proceedings brought by Mr Paterson were also found to be totally without merit:

(a) An application to the Tenancy Tribunal filed in December 2016 asserting occupation rights to the property pursuant to an unwritten tenancy agreement allegedly entered into with GLW in December 2015, some eight months after LCIL took possession as mortgagee.[39]

(b) A proceeding filed in the High Court at Napier in August 2019 against the Registrar-General of Land seeking to restrain the processing of an e-dealing lodged by LCIL for subdivision and transfer of title to the property in exercise of its power of sale as mortgagee. Doogue J observed that all causes of action in this proceeding “[bore] remarkable similarity” to the causes of action determined in Fitzgerald J’s Liability judgment.[40] The Judge found this proceeding was totally without merit.[41]

(c) A second proceeding filed in the High Court at Napier in March 2020 against the Registrar-General of Land seeking various relief in relation to the property including declarations, damages and orders vesting parts of the property in Mr Paterson. The Judge noted that this claim relied on “almost identical facts” as in the earlier proceeding against the Registrar-General and sought similar remedies.[42] Mr Paterson discontinued this proceeding. The Judge was satisfied this proceeding was totally without merit and yet another attempt to relitigate matters already determined.[43]

[36] The Judge considered the various proceedings displayed various features indicative of vexatious litigation and she was satisfied that an order under s 166 of the Senior Courts Act should be made.[44]

[37] The order restrained Mr Paterson, in any capacity, including but not limited to as a trustee of any trust, from commencing or continuing any civil proceeding (or matter arising out of a civil proceeding) that relates in any way to the matters listed at [170] of the Strike out judgment.

Appeal against Strike out judgment

[38] Mr Paterson’s notice of appeal against the Strike out judgment is dated 15 September 2020. He did not seek leave to file this document, as required by s 168(1) of the Senior Courts Act.

[39] In a minute dated 13 October 2020, Cooper J stated:[45]

[4] In a memorandum dated 29 September, counsel for [the Lepionka interests] submit that Mr Paterson has no right to appeal the decisions striking out the proceedings, since they are themselves barred by the order made under s 166. Counsel accepts that Mr Paterson may appeal the s 166 order as of right: that is the effect of s 169(8) of the Senior Courts Act. Counsel indicate that if Mr Paterson does make an application for leave in respect of the struck out High Court proceedings [the Lepionka interests] would object to those proceedings continuing.

[5] In a memorandum in reply, also dated 29 September, Mr Paterson submits that if he was successful in his appeal against the s 166 order, it would follow that he would have the right to appeal the striking out of the High Court proceedings. He submits that the most practical course to follow is for his appeal to be heard, and for the Court to adjudicate first on the s 166 issue. In doing so the Court could determine whether the balance of the appeal needed to be considered.

[6] There is no interlocutory application before the Court. Mr Paterson is aware of the view of counsel for [the Lepionka interests] and has chosen not to seek leave. No formal decision is required at this stage.

[7] The appeal should be set down when the parties are ready to proceed.

[40] No application for leave to appeal against the Strike out judgment orders striking out the second mortgagee proceeding or the malicious prosecution proceeding has since been filed by Mr Paterson and, as we now come to, he has again been adjudicated bankrupt.

Second bankruptcy — Adjudication judgment

[41] In December 2020, Mr Paterson was adjudicated bankrupt for failing to pay further costs orders in favour of the Lepionka interests totalling over $60,000.[46]

Decision

CA521/2020

[42] We are satisfied that the second mortgagee proceeding and the malicious prosecution proceeding are wholly untenable, frivolous, vexatious and an abuse of the process of the Court. Those proceedings were properly struck out by Doogue J for the reasons she gave.

[43] Any rights Mr Paterson may have had in connection with the issues raised in the first mortgagee proceeding passed to the Official Assignee following his first bankruptcy in New Zealand in April 2016. Mr Paterson’s application to have the causes of action vested in him following the Official Assignee’s disclaimer was finally determined against him in May 2017. GLW’s claims in the first mortgagee proceeding were finally determined by the Liability judgment and the subsequent settlement in December 2018 between the Lepionka interests and GLW, through its liquidator, as the judgment creditor.

[44] Mr Paterson now attempts to overcome the resulting finality by asserting in the second mortgagee proceeding that he purchased the property in March 2009 as a bare trustee for his sons and that he later “nominated GLW to take title to the property as trustee for [him] as bare trustee for [his two sons]”. GLW did not sue in the first mortgagee proceeding as a trustee of any trust.[47] GLW’s claims in those proceedings were pursued in its own right as the registered proprietor and mortgagor. In any event, all claims by GLW and its privies against the Lepionka interests in connection with the property are now precluded by the principles of res judicata and the settlement. Mr Paterson’s present claim that GLW resigned as a trustee on 20 July 2018 to ensure it had no interest in the property before it was placed in liquidation on 27 July 2018 does not assist him. LCIL had no notice of the asserted trust, nor of any change of trustee. It was entitled to settle with the liquidator of GLW as the judgment creditor. The Lepionka interests are entitled not to be further vexed with these issues.

[45] The malicious prosecution proceeding arising out of the first bankruptcy is also plainly untenable. An essential element of the cause of action is that the proceeding must have been resolved in the plaintiff’s favour.[48] That is not the case here. Mr Paterson did not oppose the bankruptcy application, nor did he appeal against the bankruptcy order. His contention that this proceeding was a malicious prosecution therefore has no prospect of success.

[46] The alternative claim that the bankruptcy was an abuse of process is also untenable for the reasons Doogue J gave.[49] The dishonest assistance cause of action is an attempt to re-run the claims dealt with in the first mortgagee proceeding and it is therefore precluded by the principles of res judicata.

[47] For these reasons, Mr Paterson’s appeal against the judgment striking out the second mortgagee proceeding and the malicious prosecution proceeding is an abuse of process and must accordingly be struck out.

[48] The Lepionka interests contend that Mr Paterson’s appeal against the s 166 order should also be struck out because Mr Paterson’s rights to litigate the matters covered by the order have passed to the Official Assignee, who has not indicated any intention to pursue those claims. For that reason, the Lepionka interests argue that the appeal against this order is now moot.

[49] While there may be little practical advantage to Mr Paterson in pursuing his appeal against this order given his bankruptcy, not all rights of potential claim vest in the Official Assignee. It is not a sufficient answer to say that Mr Paterson could seek leave to pursue such a claim within the terms of the existing order. He is entitled to test the correctness of the order placing this restriction on him. Mr Paterson may not be able to argue that the threshold jurisdictional question for the making of a s 166 order was not satisfied (namely, that at least two proceedings were totally without merit). However, the making of such an order and the setting of its terms involved the exercise of discretion and Mr Paterson has a right to contest this aspect on appeal. This aspect of the appeal cannot be categorised as an abuse of process and should be considered in the usual way on its merits, not in the context of a strike out application. That aspect of his appeal should be allowed to proceed, as Cooper J directed in his minute of 13 October 2020 (at [39] above).

CA 40/2021

[50] As noted, the second bankruptcy was based on unpaid costs awards ordered by the High Court in favour of LCIL in connection with Mr Paterson’s proceedings relating to the property. The essence of Mr Paterson’s appeal against the Adjudication judgment is encapsulated in his notice of appeal as follows:

3. The Judge erred by failing to support my Notice to Produce served on LCIL on 30 November 2020, requiring LCIL to produce the mortgagee in possession accounts that LCIL is required to produce pursuant to the Property Law Act 2007.

4. The Judge erred by failing to recognise that [GLW] had not been the owner/mortgagor of the property ... since 20 July 2018.

5. The Judge erred by failing to recognise that section 155(1) of the Property Law Act 2007 applied to LCIL, - subsequent to which LCIL - “... must account to the current mortgagor, and to every person holding a subsequent encumbrance over the land, goods or accounts receivable ...” ...

6. The Judge erred by failing to recognise that as a consequence of the acknowledged breach of their equitable duties by LCIL as mortgagee ... And subsequently LCIL must account to all parties interested in the equity of redemption; - and as a consequence of their breaches LCIL cannot claim for any costs incurred from the time they breached, (1/4/2015), and onwards.

7. The Judge erred by failing to recognise that myself and parties associated with me are entitled to an accounting from LCIL as mortgagee in possession; - pursuant to the Property Law Act 2007, and pursuant to the equity of redemption.

8. The Judge erred by failing to order an accounting from LCIL.

...

14. The Judge erred by failing to recognise that I had a right of set-off against the sums claimed by LCIL to bankrupt me; - and that due to LCIL owing substantially more monies to me than I do to LCIL, I should not have been bankrupted.

(Emphasis in original, footnotes omitted.)

[51] Mr Paterson seeks orders setting aside the Adjudication judgment and directing LCIL to provide “a full set of mortgagee in possession accounts” pursuant to s 155 of the PLA.

[52] It can be seen that Mr Paterson seeks to ventilate on this appeal the same underlying issues that were determined in the Liability judgment and compromised in the settlement. Mr Paterson’s claims, purportedly in answer to the second bankruptcy application, cannot be entertained. They are clearly an abuse of process and the appeal must be struck out.

Mr Paterson’s interlocutory application

[53] It follows from these conclusions that the orders sought by Mr Paterson in his interlocutory application dated 27 April 2021 referred to at [4] above must be declined. The basis for his application for the first three orders has fallen away. There is plainly no basis for the fourth order sought, namely an order convicting and fining LCIL and Mr Lepionka for alleged offences under the PLA. Mr Paterson’s application for such orders merely serves to underscore the frivolous, vexatious and abusive nature of these appeals (save in respect of his appeal against the s

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166 order). Costs [54] The Lepionka interests would ordinarily be entitled to an award of costs, having largely succeeded on their application to strike out these appeals. However, because Mr Paterson is bankrupt and has succeeded to a limited extent, we make no order for costs. Result [55] The appeal in CA521/2020 is struck out save in respect of the order made under s 166 of the Senior Courts Act. That aspect of the appeal is allowed to proceed. [56] The appeal in CA40/2021 is struck out. [57] The interlocutory application by the appellant dated 27 April 2021 is declined. [58] There is no order as to costs. ------------------------------------------------------------------------------- [1] Paterson v Lepionka & Co Investments Ltd [2020] NZHC 2184 [Strike out judgment]. [2] Paterson v Lepionka & Co Investments Ltd CIV-2019-441-78 [the second mortgagee proceeding]. [3] Strike out judgment, above n 1, at [168]. [4] Paterson v Lepionka & Co Investments Ltd CIV-2020-441-41 [the malicious prosecution proceeding]. [5] Strike out judgment, above n 1, at [169]. [6] At [170]. [7] Lepionka & Co Investments Ltd v Paterson [2020] NZHC 3332 [Adjudication judgment]. [8] The letters GLW represent Garth, Luke and William, being Mr Paterson and his two sons. [9] GLW Group Ltd v Lepionka & Co Investments Ltd CIV-2015-404-2168 [the first mortgagee proceeding]. [10] Paterson v Lepionka & Co Investments Ltd [2016] NZHC 1331. [11] AFI Management Pty Ltd v Lepionka & Co Investments Ltd [2017] NZHC 1176 at [167]. [12] AFI Management Pty Ltd v Lepionka & Co Investments Ltd CIV-2015-404-2836. [13] AFI Management Pty Ltd v Lepionka & Co Investments Ltd [2017] NZHC 3116 [Liability judgment] at [494(d)] and [494(f)]. [14] At [494(h)]. [15] At [494(f)]. [16] At [494(j)]. [17] GLW Group Ltd v Lepionka & Co Investments Ltd [2018] NZHC 1658 at [15]. [18] At [15]. [19] At [16]. [20] At [36]. [21] At [90(b)]. [22] At [90(c)]. [23] At [74]. [24] Paterson v Lepionka & Co Investments Ltd [2018] NZHC 3022. [25] Paterson v Lepionka & Co Investments Ltd [2019] NZCA 548. [26] GLW Group Ltd (in liq) v Lepionka & Co Investments Ltd [2019] NZCA 24. [27] Lepionka & Co Investments Ltd v Naldapat Ltd [2019] NZHC 1646 at [1]. [28] At [4]. [29] At [78] and [80]. [30] At [85]. [31] Liability judgment, above n 13. [32] Strike out judgment, above n 1, at [55]. [33] Paterson v Lepionka & Co Investments Ltd CA214/2020, 8 June 2020 (Minute of Brown J). [34] Strike out judgment, above n 1, at [79], [80] and [92]. [35] Paterson v Lepionka & Co Investments Ltd, above n 25. [36] Strike out judgment, above n 1, at [97]. [37] At [133]–[134]. [38] At [116]. [39] At [112]. [40] At [122]. [41] At [128]. [42] At [130]. [43] At [132]. [44] At [157]–[162]. [45] Paterson v Lepionka & Co Investments Ltd CA512/2020, 13 October 2020 (Minute of Cooper J). [46] Adjudication judgment, above n 7. [47] High Court Rules 2016, r 5.35. [48] See Rawlinson v Purnell Jenkinson & Roscoe [1999] 1 NZLR 479 (HC) at 484–485 and Burgess v Beaven [2020] NZHC 497 at [20].. [49] Strike out judgment, above n 1, at [81]–[94].
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