Body Corporate 68792 v Lynx Trustees Limited (in liquidation)

[2022] NZHC 1156

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-389

[2022] NZHC 1156

BETWEEN

BODY CORPORATE 68792

Plaintiff

AND

LYNX TRUSTEES LIMITED

(in liquidation) Defendant

Teleconference:	11 May 2022
Appearances:	G Neil for the liquidators of Lynx Trustees Ltd (in liquidation) D Livingston for the trustees of the Link Trust (No. 1)
Judgment:	24 May 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    On 13 April 2022 I issued a minute in which I approved an interim costs claim by the liquidators of Lynx Trustees Ltd (in liquidation) pursuant to ss 276 and 284 of the Companies Act 1993. Subsequently, a formal order was drawn up and sealed. Now, the trustees of the Link Trust (No. 1) (the Trust), whose role in this matter will become evident, seek a recall of the sealed order. That is opposed by the liquidators.

[2]    I convened a telephone conference on 11 May 2022, during which I heard from Mr Neil for the liquidators and Mr Livingston for the trustees. Both counsel also filed and served helpful memoranda.

[3]    The background is as follows. On 10 September 2019 this Court made an order winding up Lynx Trustees and appointing the liquidators. Lynx Trustees had, for a time, been a trustee of the Trust. The trustees of the Trust are the registered owners of valuable real estate in and around Wellington, though they also have substantial debt.

BODY CORPORATE 68792 v LYNX TRUSTEES LIMITED [2022] NZHC 1156 [24 May 2022]

As a result the net financial position of the Trust is unknown. In any event, the liquidation proceeded, and the liquidators of course incurred costs.

[4]The liquidators’ total costs as at 6 October 2021 were $449,505.66,

$120,079.50 of which are their own costs and $329,426.16 are external costs — mainly legal costs associated with litigation. The liquidators wished to have their costs as at that date approved. As the company in liquidation has no assets, everyone accepts that the liquidators’ legitimately claimable costs will ultimately become a charge against the assets of the trust pursuant to the company’s right as a trustee to be indemnified.

[5]    Pursuant to the s 284(1)(e) of the Companies Act the liquidators sought the Court’s approval of their costs down to 6 October 2021.

[6]    Such applications are generally made on an ex parte basis. The Court receives a memorandum from the liquidators who provide details of their costs and certify as to their legitimacy. No one else is involved. Invariably, the Court deals with such applications on the papers.

[7]    In this case, the liquidators’ application was appreciably more detailed than is normally the case which was appropriate having regard to the quantum of the claim.

[8]    Whilst Mr Neil on behalf of the liquidators originally urged the Court to deal with this matter on the papers in the usual way, in a minute dated 4 February 2022 I directed  that  the  papers  be   served   on   the   current   trustees   of   the   trust,   Mr Harry Memelink and Ms Cisca Forster, and that they be given twenty working days to respond. In doing so I was conscious of the quantum of the claim and the fact that in earlier litigation involving both the liquidators and the trustees the liquidators’ costs had been in issue.

[9]    In accordance with my directions the liquidators arranged for service on the trustees. There is some confusion around exactly when service was effected, but it is unnecessary to go into that because it is common ground that on the last day of the 20 working day period Mr Memelink, presumably acting on his own behalf and on behalf of his fellow trustee, Ms Forster, filed and served a memorandum. Essentially,

Mr Memelink asked the Court to order that the trustees be joined as parties to the liquidators’ application so that they could oppose the application for approval. It did not go on to offer any details as to the grounds for any such opposition.

[10]   Regrettably, for reasons which I am not sure I entirely understand, and which, in any event, are irrelevant, Mr Memelink’s memorandum did not reach me. To be clear, it is common ground that Mr Memelink filed and served his memorandum on  1 April 2022, that this was within the timeframe the trustees had been given, and that his memorandum was received by the Registry. However, it did not come to my attention, and I was unaware of its existence when I issued my minute of 13 April 2022.

[11]   Rule 11.9 of the High Court Rules 2016 expressly addresses the circumstances in which the Court may recall judgments before they are perfected or sealed. However, as it says, that rule applies only prior to judgments being sealed. Once they are sealed r 11.9 is irrelevant.

[12]   Nevertheless, the Court has an inherent jurisdiction to recall a judgment even after it is sealed where the circumstances justify this. It is not a step that the Court ever takes lightly. As a rule, once a judgment is sealed it must stand for better or worse, subject to appeal.

[13]The leading case is Herron v Wallace1.

[14]   The facts of that case are somewhat removed from the situation here. There, the proceeding went to trial. Apparently, both prior to and during the trial the defendant sought further and better discovery from the plaintiff. That was resisted on the basis that no additional relevant documentation was in existence. The trial concluded and judgment was entered for the plaintiff against the defendant. The judgment was sealed. Subsequently, the defendant ascertained that the plaintiff was involved in other litigation and on inquiry established that there had indeed been additional relevant material which — it was said — might have resulted in a different outcome in the proceeding. In the meantime, the defendant had appealed from the

1      Herron v Wallace [2016] NZHC 2426; (2016) 23 PRNZ 620.

High Court decision and the appeal was pending. The defendant then applied to the High Court for an order recalling that Court’s judgment on the grounds that there was new evidence. Faire J dismissed the application.

[15]   Early in his judgment Faire J recorded an agreement between counsel as to the applicable principles:

[4] Counsel are agreed that, in summary, the  Court’s  jurisdiction  to consider a recall of its judgment and order a rehearing is covered by the following matters of principle:

(a)The Court has an inherent jurisdiction to act effectively, in particular by ensuring that its processes are used to secure justice and not misused to result in injustice. The inherent jurisdiction may be invoked whenever the justice of the case so requires;

(b)This jurisdiction permits limited exceptions to the finality of judgment principle, subject to appeal processes;

(c)In most cases which discuss the inherent jurisdiction, reference has been  made  and  an  endorsement  given  to  the  analysis  in   Master Jacob’s, “The Inherent Jurisdiction of the Court”;

(d)New Zealand courts have concluded that the inherent jurisdiction to recall or rescind a judgment and to order a rehearing or retrial in whole or in part extends to cases where the judgment has been perfected;

(e)The removal of the former High Court Rules 494 and 495, which provided explicitly for the direction of a new trial on the ground of a miscarriage of justice, did not remove the Court’s inherent jurisdiction or implied powers to do so;

(f)Cases in which the inherent jurisdiction may properly be applied to recall or rescind a sealed judgment after a full trial must be truly exceptional. The Court must be satisfied on the circumstances in their totality, that “there has been a miscarriage of justice that justifies a new trial”; and

(g)If the grounds advanced in support of the recall or rescission application include identification of relevant documentary evidence not reasonably available for use at the trial, the respondent’s discovery omissions may be relevant. The evidence must be such that it would probably have had an important influence on the result.

(Footnotes omitted)

[16]   In the course of applying those principles to the case before him Faire J focussed on the circumstances in which a sealed judgment may be recalled. His

Honour certainly accepted that the High Court’s inherent jurisdiction enabled it to do so.

[17]   Faire J’s reasoning in relation to this — which appears to me to be entirely orthodox — was that the inherent jurisdiction of this Court is always at hand to enable the Court to act so as to ensure the proper administration of justice, and that the important principle of the finality of judgments — especially once sealed — may in rare circumstances, where the interests of justice require, have to yield to the exercise of that inherent jurisdiction.

[18]   Faire J analysed a number of cases so as to be in a position to offer some description of the circumstances in which the Court’s inherent jurisdiction might be exercised. His conclusion was as follows:

[33]      From these cases, in my view, the principles may be extracted in the following way:

(a)The starting point must be the finality of litigation which reflects the public interest in there being an end to litigation, and the private interests of the parties in not being subject to vexatious litigation; however

(b)absolute finality of litigation is unsafe [as] there are circumstances in which the Court may invoke its inherent jurisdiction. There are some established categories of exception to the finality of litigation:

(i)a slip or omission may be rectified;

(ii)a judgment may be set aside, usually by separate action, where it was obtained by fraud;

(iii)a case may be reopened where fresh evidence not previously available has come to light which is material to the outcome of the case;

(iv)a judgment obtained by consent may be reopened; and

(v)a supplementary judgment may be given to cover a matter not previously dealt with.

[19]   The terms in which that conclusion was expressed suggest that Faire J viewed it as an exhaustive description of the circumstances in what the Court would recall a sealed judgment. In my view, it would be unhelpful for the Court to circumscribe the

circumstances in which it would exercise its inherent jurisdiction in any area. The High Court’s inherent jurisdiction (contrasting that with every court’s inherent powers) exists by reason of the court being a superior court of record, and that jurisdiction is not one that lends itself to categorisation and definition.

[20]   I treat Faire J’s description of the circumstances in which the Court will exercise its inherent jurisdiction as no more than indicative.

[21]   It seems clear that this case falls outwith the Herron v Wallace categories. A slip is generally understood to be an infelicity in a judgment resulting in it not conveying what the Court intended it to convey. There is no question of fraud in this case. Nor is there any suggestion of fresh evidence. The suggestion seems to be that if the Court acceded to the trustees’ informal request that they be allowed to participate they may be able to mount a case on one basis or another — factual or legal — against the liquidators’ claim. The judgment was not obtained by consent. This is not a case in which a supplementary judgment is likely to be a useful option.

[22]   In a nutshell, what has happened here is that, as a result of administrative error, and through no fault of the trustees, I proceeded to deal with the liquidators’ application in ignorance of the existence of the trustees’ memorandum, and on the assumption that they had waived their entitlement to involve themselves in the application. As a result, they were not heard.

[23]   Arguably, then, there has been a breach of natural justice to the extent that persons who may be affected by the outcome of the Court’s determination have not been heard.

[24]   The audi alteram partem principle is fundamental, and the trustees as interested parties (I use that term in the broadest sense, as they are not parties to the proceeding) have not been heard.

[25]   To my mind, the only real question is the appropriate process to enable the trustees to be heard.

[26]   I  reject  the  invitation  originally  advanced   by   the   trustees,   through   Mr Memelink, and since developed by Mr Livingston on their behalves, that they should be made formal parties to this proceeding. That appears to me to be an unnecessary step that will only result in delay and further cost. I am also influenced by the fact that the trustees, in responding to the application did nothing other than file a memorandum as opposed to making a formal application, and, having received the sealed judgment, took the thick end of a month to raise the issue that is now raised.

[27]   In my assessment, substantial justice will be done if the trustees are given an opportunity to respond as interested parties, without being formally joined. They will be free to do so in whatever way they wish, but I expect this may involve affidavit evidence and written submissions. Of course the liquidators must be given an opportunity to reply. As already said, applications for the approval of costs are invariably dealt with on the papers, and in the absence of any objection, there seems no reasons to depart from that practice here.

[28]Accordingly, I make the following directions:

(a)My order of 13 April 2022 (as subsequently sealed) is recalled;

(b)Within 20 working days the trustees may file and serve whatever affidavit evidence and submissions in response to the liquidators’ application for an order approving their costs they wish;

(c)the liquidators are to have a further 10 working days to respond.

[29]I will then deal with the matter on the papers.

[30]Costs are reserved.

Associate Judge Johnston

Solicitors:
Meredith Connell, Auckland for liquidators