Burchell v Official Assignee
[2017] NZHC 1508
•3 July 2017
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2016-404-3053
[2017] NZHC 1508
BETWEEN LLEWELLYN BURCHELL
Applicant
AND
THE OFFICIAL ASSIGNEE
First Respondent
ROYDON McGEE
Second Respondent
Hearing: 4 May 2017 Counsel:
Applicant in person
M Deligiannis and M Cook for Respondents
Judgment:
3 July 2017
JUDGMENT OF WHATA J
This judgment was delivered by me on 3 July 2017 at 11 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
\
Solicitors: M Deligiannis, Wellington
Crown Law, Wellington
Copy to: The Applicant
BURCHELL v THE OFFICIAL ASSIGNEE & ANOR [2017] NZHC 1508 [3 July 2017]
[1] This is an interlocutory application by the respondents to strike out Mr Burchell’s claim. I must also address a costs issue arising out of an application for a stay of execution in relation to a discharge of property (being Mr Burchell’s two motorcycles). The background to this is that the Official Assignee consented to the two motorcycles being vested in Mr Burchell, which resolved the stay of execution application.
Background
[2] Mr Burchell was bankrupted on 29 June 2004. He was discharged on 10 September 2009. On 1 December 2010, the Commissioner of Inland Revenue obtained judgment against Mr Burchell for $34,072.47.1 Mr Burchell unsuccessfully applied to set aside that judgment. The Commissioner of Inland Revenue then sought and obtained an order for bankruptcy based on this debt on 16 December 2011.2 This was Mr Burchell’s second bankruptcy.
[3]All of the above is a matter of record.
[4]Mr Burchell claims that:
(a)the Inland Revenue Department (IRD) fabricated the debt;
(b)he was bankrupted on the basis of this debt;
(c)he has been held in bankruptcy since; and
(d)he has been denied information, misdirected by the IRD and the Official Assignee and assaulted when he has tried to comply and seek discharge from bankruptcy.
[5]He advances two causes of action:
1 Commissioner of Inland Revenue v Burchell DC North Shore CIV-2010-044-274, 1 December 2010.
2 Burchell v Commissioner of Inland Revenue HC Auckland CIV-2011-404-3464, 16 December 2011.
(a)deceit; and
(b)misfeasance in public office.
[6] Mr Burchell identified the refusal by the IRD to provide him with information that might assist him in discharging his bankruptcy as central to both the deceit and the misfeasance claims. Similarly, Mr Burchell identified the refusal by the Official Assignee to process the relevant paperwork to secure discharge of his bankruptcy as indicative of deceit and misfeasance.
In-trial orders
[7]At the conclusion of the hearing, I made the following orders:
(a)Mr Burchell had two weeks to file any submissions in response to the submissions by the applicants.
(b)I directed that the applicants provide an affidavit relating to service of the interlocutory application.
(c)I granted leave to the applicants to file further submissions, in the event that the courier package documentation could not be found (or did not exist).
(d)I also granted leave to Mr Burchell to file evidence in relation to his first bankruptcy. He alleged that one aspect demonstrating bad faith is that the IRD bankrupted him the first time, based on the income tax assessment, and then used the same material to bankrupt him a second time.
(e)Leave was also granted to the applicants to file submissions in relation to Mr Burchell’s second bankruptcy.
[8]I address the further submissions and affidavits filed where appropriate below.
The pleadings
[9] The pleadings in dispute make the following allegations in relation to the tort of deceit:
1The first cause of action is the tort of deceit which provides a civil remedy for an individual who has relied on a false representation to their detriment.
2Proof of the deceit is that the defendant/s made a representation to another party which was false.
3A member of the IRD staff, either Mr McGhee or a person under his management, created false and deceitful amounts related to Mr Burchell’s tax returns.
4These large amounts, which had no basis, were used in Court to Mr Burchell’s detriment.
5David Harte deceived Mr Burchell by making an appointment for Mr Burchell to hand in his statement of affairs, but on Mr Burchell’s arrival, David Harte violently assaulted Mr Burchell, kept the document in his office but never processed it. These actions occurred to Mr Burchell’s detriment.
…
[10] Ms Deligiannis for the applicants submits that these pleadings in relation to deceit do not disclose facts capable of establishing the tort of deceit. As she notes (and which was not disputed), to establish the tort of deceit, the following elements must be present:3
(a)A false representation as to a past or existing fact made by a defendant who knew it to be untrue or had no belief in its truth or who was reckless as to its truth.
(b)The defendant made the representation with the intention that the plaintiff should have acted on the representation.
(c)The plaintiff acted in reliance on the representation.
3 Amaltal Corporation Ltd v Maruha Corporation [2017] 1 NZLR 607 (CA) at [46].
(d)The plaintiff suffered damages as a result of reliance on the representation.
[11] In the present case, she submits that the factual assertions are entirely speculative and without foundation.
[12]Dealing first with the allegation of deceit in relation to the IRD, she notes:
(a)Mr Burchell has pleaded that either Mr McGee or a person under his management made the alleged false and deceitful representation. It could not have been Mr McGee, who was not responsible for nor had anything to do with investigating Mr Burchell’s tax affairs, and it is not sufficient to simply plead some other person.
(b)The amounts relating to Mr Burchell’s tax returns were arrived at after formal assessment, pursuant to the Tax Administration Act 1994, and there is no proper basis for inferring that they were wrong, let alone deceitfully produced.
(c)In any event, s 109 of the Tax Administration Act 1994 precludes, except in challenged proceedings to which Parts 8 and 8A of the Act applies, disputing in any Court or in any proceedings a disputable decision, which includes an assessment of tax, on any grounds whatever and, further, every assessment and all particulars are deemed to be, and are taken to be, correct in all respects.
(d)Mr Burchell had various opportunities to challenge the assessments, including by way of challenge to the bankruptcy procedure.
(e)There is no pleading that Mr Burchell acted in reliance on any representations made to him in relation to his tax affairs and, at their highest, the pleadings are that the courts relied on the representation as to Mr Burchell’s tax debts.
[13] In relation to Mr Harte, Ms Deligiannis submits that even if the facts pleaded are true, making an appointment for Mr Burchell to come into the reception to obtain a discharge certificate for his first bankruptcy cannot constitute a false representation and the remainder of the facts pleaded against the first and third applicants are pure fabrication and so obviously devoid of any substance that they should be completely disregarded.4
Assessment
[14] I agree with Ms Deligiannis that the pleadings on deceit are so without merit that they must be struck out.
[15] First, Mr McGee plainly is not the correct defendant, having no role whatsoever in Mr Burchell’s tax affairs before or at the time of his bankruptcy.
[16] Second, the defendant must make a representation with the “intention” that the plaintiff should have acted on the representation. A proper defendant must be identified. It is not enough to simply plead that someone within a particular office had the requisite intention.5
[17] Third, Mr Burchell has simply provided no information to support the claim that the original assessments were false or included deceitful amounts. By contrast, the evidence produced by the applicants shows that a transparent process was followed, including notification to Mr Burchell of the relevant income tax assessments. I observe that while generally the Court in considering a strike-out application will limit evidence to that which is undisputed, where an essentially factual allegation is so demonstrably contrary to indisputable fact the Court may consider contrary affidavit evidence and look beyond bare statements to determine whether particular assertions are capable of belief.6 I am willing to consider the affidavit evidence produced by the applicants on this basis.
4 Citing Collier v Panckhurst CA136/97, 6 September 1999 at [19].
5 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [102].
6 Pharmacy Care Systems Ltd v Attorney-General (2001) 15 PRNZ 465 (CA) at 472.
[18] Their evidence included, among other things, a letter dated 17 February 2006 to Mr Burchell setting out the basis for his income tax assessment for the period ending
31 March 2005 which was then assessed at $11,072.88, together with shortfall penalties. A statement of account was also sent to him on 14 January 2010, which details the amounts owing as at that date, in the sum of $42,765.85 (inclusive of shortfall penalties, late payment penalties and interest). I also have the notice of claim in respect of the same debt, together with an affidavit of service. The amount claimed is displayed, including the sum for outstanding tax arrears, as then $34,062.76. There is then an order as to judgment of costs and costs made on the notice of defence having been struck out. Judgment for the plaintiff was in the amount of $30,088.47, together with costs, in the order of $3,984.00. The order was dated 1 December 2010. There is also a judgment of Associate Judge Faire (as he then was) of 16 December 2011, making an order adjudicating Mr Burchell a bankrupt. The order notes that Mr Burchell was present and the judgment sum relied upon are based on the judgment of the District Court of 1 December 2010 and in the sum of $34,072.47.
[19] Given this chronology, notwithstanding that Mr Burchell claims that he was not properly served with documents at various times, I am satisfied that the claim based on deceit levelled at the IRD is without foundation and must be struck out.
[20] In reaching this view I have not relied on the privative effect of s 109 of the Tax Administration Act 1994. I would prefer to leave any firm conclusion about its scope to a context where the underlying merits of the case warrant a firm conclusion.
[21] In relation to the claims against the Official Assignee, the mere failure by Mr Harte to process a statement of affairs cannot ground a claim in deceit. Put simply, there is no false representation. The simple act of making an appointment, for the purposes of handing in a statement of affairs, is not a commitment or representation as to existing fact. In any event, the refusal by Mr Harte to accept the statement of affairs (assuming that to be true), could hardly give rise to a claim in damages of the kind claimed by Mr Burchell. His claim for damages arises on the basis that he is prevented from obtaining income and for defamation. I cannot see how the alleged representation (the making of an appointment) and then the failure to process the statement of affairs is causative of this alleged loss.
[22] In any event, there is simply nothing in the information supplied by Mr Burchell which suggests that Mr Harte intended to deceive him at any point, whether by making the appointment or by refusing to process his statement of affairs. This claim is simply without any merit.
Misfeasance in public office
[23]The elements for misfeasance in public office are not disputed. They are:7
(a)The act complained of must be done by a public officer and in the exercise of that officer’s public functions.
(b)There must be actual damage or loss suffered by the plaintiff caused by the public officer’s conduct.
(c)The presence of a mens rea element of malicious intent in that either:8
(i)the public officer acts with specific intent to injure a person or persons (i.e. bad faith in the sense that the officer is exercising the public power for an improper or ulterior motive); or
(ii)the public officer acts knowing that that he or she has no power to do the act complained of and that the act will probably injure the plaintiff (i.e. bad faith in that the public officer does not believe that his or her act is lawful and is reckless as to the effect on the plaintiff).
[24] Dealing, first, with the claim against Mr McGee, for the reasons already expressed at [15]-[18], this claim has no merit. In short, the claim that malice or ill- will formed the basis of the IRD tax assessment and the subsequent bankruptcy process that followed is doomed to failure.
[25]In relation to Mr Harte, the pleading reads:
7 Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 5, at [40]-[44].
8 At [41]; citing Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 (HL) at 191.
22David Harte knew that he was abusing his public power and authority when:
(a)He refused to discharge Mr Burchell after 3 years after the first bankruptcy.
(b)He assaulted Mr Burchell and refused to process the paperwork during May 2012.
(c)He refused to discharge Mr Burchell.
23He was recklessly indifferent to the limits to or restraints upon his public power and authority.
24He acted with the intention of harming the plaintiff, known as targeted malice to Mr Burchell. Malice and deliberate excess of power was exhibited when:
(a)David Harte acted with the knowledge as well as the conscious and reckless indifference to the probability of harming the plaintiff.
25David Harte acted in bad faith because:
(a)He would not discharge Mr Burchell after three years and did not supply a reason;
(b)He physically assaulted Mr Burchell;
(c)He did not process Mr Burchell’s statement of affairs and still refuses to discharge Mr Burchell;
(d)He authorised a disclaimer on Mr Burchell’s old motorbikes which are Mr Burchell’s only form of transport;
(e)The disclaimer notice of 6 October 2016, signed by Mr Anthony Pullan (the Deputy Assignee), was only dated 15 November 2016 and sent out sometime afterwards.
[26] Ms Deligiannis submits that the allegations are intrinsically unlikely and, in any event, contrary to the evidence both of Mr Harte and Mr Pullan. It is also noted that it is unclear how Mr Harte could prevent Mr Burchell from being discharged from his bankruptcy, given that Mr Burchell can apply to the High Court to be discharged under s 294 of the Insolvency Act 2006. It is also submitted that Mr Burchell has not established any loss arising from the alleged misfeasance.
[27] Ms Deligiannis also submits that the allegations are speculative and without foundation, frivolous, vexatious and amount to an abuse of process.
Assessment
[28] Bare allegations of assault, process delay and the disclaimer provide a tenuous basis for a claim of misfeasance in public office against either of the second and third respondents. The threshold test for the tort was stated by the Court of Appeal in Chesterfields Preschools as follows:9
[40] As the tort currently stands, there are two forms of liability: targeted malice and non-targeted malice. Under both forms, the act complained of must be done by a public officer and in the exercise of that officer's public functions. A further, fundamental element of the tort common to both forms is that there must be actual damage or loss suffered by the plaintiff caused by the public officer's conduct.
[41] The two forms of the tort have slightly different requirements concerning the mental element. Targeted malice requires the public officer to have specifically intended to injure a person or persons. This involves bad faith in the sense that the officer is exercising the public power for an improper or ulterior motive. Non-targeted malice occurs when the public officer acts knowing that he or she has no power to do the act complained of and that the act will probably injure the plaintiff. This involves bad faith in that the public officer does not believe that his or her act is lawful. The plaintiff must therefore prove two aspects: first, that the officer acted with the knowledge of the illegality of the act, or with a state of mind of reckless indifference as to the illegality of the act. Secondly, that the public officer knew that his or her conduct would probably injure the plaintiff or a person of a class of which the plaintiff was a member, or was reckless as to the consequences of his or conduct in the sense of not caring whether the consequences happen or not. Subjective — as opposed to objective — recklessness is necessary for both limbs.
(citations omitted)
[29]The Court also observed:10
[86] On the question of pleading intent, recklessness or bad faith, r 5.17(2) provides that if a party alleges a state of mind of a person, the party pleading must give particulars of the facts relied on in alleging that statement of mind. In the context of the tort of misfeasance in public office Tugendhat J in Carter v Chief Constable of the Cumbria Police emphasised that an allegation of bad faith must be properly particularised. Lord Hutton in Three Rivers similarly highlighted that bad faith — being an essential element in cases of misfeasance — needs to be clearly pleaded.
(citations omitted)
9 At [40]-[41].
10 At [86].
[30] The first point to note is that the act complained of must have a public character. There can be no serious suggestion that the claimed assault was carried out purpose to the exercise of public power. At most, it has contextual relevance only.
[31] The focal point of the claim therefore must be the process delay and the disclaimer. But the claim about process delay is plainly misconceived. The discharge process is a detailed one, including with oversight by the High Court. The Official Assignee has no “power” to refuse discharge. Rather he or she has a power of objection to automatic discharge. The scope for abuse of this power is minimal. It is utterly implausible that Mr Harte would, within the confines of a highly regulated discharge process, seek to maliciously delay Mr Burchell’s discharge.
[32]To elaborate, s 290 of the Insolvency Act 2006 governs discharge. It states:
290 Automatic discharge 3 years after bankrupt files statement of affairs
(1)A bankrupt is automatically discharged from bankruptcy 3 years after the bankrupt files a statement of affairs under section 46 or section 67, but may apply to be discharged earlier.
(2)However, a bankrupt is not automatically discharged if—
(a)the Assignee or a creditor has objected under section 292
and the objection has not been withdrawn by the end of the 3-year period referred to in subsection (1); or
(b)the bankrupt has to be publicly examined under section 173 and has not completed that examination; or
(c)the bankrupt is undischarged from an earlier bankruptcy.
[33] The significance of this is that discharge is automatic three years after the filing of a statement of affairs, in this case pursuant to s 67 which requires a bankrupt to file a statement of affairs after adjudication. An Assignee may then object to automatic discharge, but must do so in a prescribed manner.11 There is no suggestion that the Assignee has triggered this provision. But if Mr Harte had done so, this would in turn trigger a process of examination.12 The Assignee must then file a report with the
11 Insolvency Act 2006, s 292.
12 Section 295.
Court.13 The Court then may determine whether to grant or refuse discharge.14 Alternatively, an undischarged bankrupt may seek the intervention of this Court pursuant to s 294 of the Insolvency Act 2006.
[34] Mr Burchell noted that he had tried to file his statement of affairs in May 2017 but was refused. When asked whether he could produce this statement, Mr Burchell said that he could not produce it because Mr Harte had taken it. This has the odour of contrivance; especially given the documentary evidence of multiple requests for a statement of affairs by the Official Assignee but no documentary evidence of a statement having been properly lodged.
[35] In any event, it is unnecessary for me to resort to the evidence: the bare assertion of abuse of a (non-existent) power to refuse discharge, without any particulars that might substantiate a claim of bad faith, is meritless.
[36] Finally the fact of disclaimer of the motorcycle by itself or in combination with bare allegations of process delay and assault does not come close to establishing the requisite bad faith.
The bankruptcies
[37] In accordance with my in-trial orders, Mr Burchell filed a memorandum, together with a supporting affidavit, on 2 June 2017 relating to his first bankruptcy. As noted, one of Mr Burchell’s claims is that the IRD improperly obtained his first bankruptcy.
[38] Mr Burchell notes that he was adjudicated bankrupt in 2004, he says, for an amount less than $3,000. He also says that during 2007, the Insolvency Office refused to discharge him, advising him that it was because he owed the IRD over $30,000. In this way, he says, the IRD and the Official Assignee used false amounts to keep the plaintiff bankrupt as part of the first bankruptcy.
13 Section 296.
14 Section 298.
[39] Mr Burchell then outlines his account of proceedings issued by the IRD in 2008 noting, he says, there was no opportunity for him to reply to a letter dated 14 April 2008 regarding non-payment.
[40]He claims the dates were altered to “cover their crime”.
[41] Mr Burchell also says that he does not know the outcome of the 2008 proceedings and that Court staff have conspired with the IRD to deliberately not inform him, and used the Court to abuse him without his knowledge in order to get orders against him.
[42] Mr Burchell then complains that many years after the expected discharge date, he was discharged from the first bankruptcy when the second bankruptcy was registered. He refers to an alleged discussion with a Mr Chris Viljoen who advised him that he was instructed by David Harte to refuse to provide any information. He describes how, in 2010, the IRD filed a claim very similar to the 2008 claim, noting the dates were the same but the figures have been altered. He refers to this as criminal deceit.
[43] He claims that a staff member at the IRD, alone or with other staff members, accessed the computer system to alter dates and figures and had intended the plaintiff loss.
[44] He says that the filing of the second proceedings was an abuse of process as it was the same case as the 2008 proceeding. Thus, he says, he was made bankrupt by an abuse of process and deception.
[45] Ms Deligiannis responds that Mr Burchell’s affidavit makes apparent that he now concedes that he was initially bankrupted by Baycorp Advantage (NZ) Ltd, not the IRD. The allegation that the IRD brought proceedings to prevent Mr Burchell from being discharged is also rejected. Reference is made to the sentencing notes of Courtney J in R v Burchell15 relating to his conviction at trial in 2007 for offences
15 R v Burchell HC Auckland CRI-2005-044-7058, 4 December 2007.
under the Insolvency Act 1967. It is suggested this is the reason why the respondent was prevented from being discharged from his first bankruptcy.
[46] It is also noted that the respondent was discharged from his first bankruptcy on 10 December 2009 and that the IRD did not file a notice of claim seeking judgment that led to the second bankruptcy until 5 March 2010. Ms Deligiannis also submits that the involvement of the IRD for the debt of over $30,000 was on the second bankruptcy, not the first bankruptcy.
Assessment
[47] Nothing in Mr Burchell’s second memorandum or affidavit causes me to change my view that the allegations directed towards the IRD are baseless. If anything, it appears to me that Mr Burchell is seeking to use these proceedings as a rear guard action to address his bankruptcies. Moreover, and in summary, contrary to Mr Burchell’s primary claims, the documentary record reveals that he was bankrupted following a fully transparent process and for good reason.
Outcome on applications for strike out
[48] On the basis of the foregoing, the statement of claim against the respondents is struck out in all respects.
Costs on vesting of motorcycles
[49] Mr Burchell sought costs in relation to his applications, firstly, for stay of execution in relation to disclaimer of his motorcycles then held by the Official Assignee, and second the vesting of the motorcycles in his name.
[50]The application for costs is opposed on the basis that:
(a)Mr Burchell is a lay litigant and not normally entitled to costs; and
(b)the Official Assignee consented to the applications and did not put Mr Burchell to any additional cost.
[51] I agree with the Official Assignee. There is no proper basis for an award of costs. Mr Burchell is a lay litigant and would not ordinarily be entitled to costs. Secondly, Mr Burchell was not put to any additional expense that he would otherwise be put to for the purposes of obtaining the property formerly held by the Official Assignee.
Other matters
[52] Mr Burchell raised various complaints about the failure of the applicants to serve documentation on him in accordance with the Court’s timetabling directions and/or the High Court Rules 2016. In particular, he says that he was not:
(a)served with the notice of interlocutory application and supporting affidavits within time, namely by 8 March 2017; and
(b)he was not served with the applicants’ submissions and supporting authorities within three days of the hearing, in accordance with r 7.39 of the High Court Rules 2016..
[53] I have before me affidavits by Sharon Dawn Taylor and Therese Jeanne Delpech. Ms Delpech advises that on 7 March 2017, she arranged Courier Post to courier to Mr Burchell:
(a)the applicants’ Interlocutory Application on Notice to Strike Out Statement of Claim, dated 6 March 2017;
(b)the affidavit of Royden McGee, in support of the strike out application dated 6 March 2017;
(c)the affidavit of David Paul Harte, on behalf of Official Assignee, in support of the applicant’s strike out application dated 6 March 2017; and
(d)the affidavit of Anthony Steven Pullan, on behalf of the Official Assignee, in support of the applicant’s strike out application dated 6 March 2017.
[54] She also says that on 14 March 2017, she obtained an update from Courier Post that Mr Burchell’s address for service of 22 Mokoia Road, Birkenhead, Auckland, was a Post Shop and that Courier Post further advised that they had left the document at the agent/reception of the Post Shop at that address for Mr Burchell to collect. She also indicates that she attempted to send the documents by facsimile to (09) 4755782, being a facsimile number used by the respondent.
[55] Ms Taylor also advises that on 27 April 2017, she arranged for Courier Post to overnight courier the applicant’s submissions and bundle of documents for the interlocutory hearing on 4 May 2017 to Mr Burchell. She subsequently filed a second affidavit from the courier company, detailing the couriering of the documents to the identified location. She also advised that there was confirmation that Mr Burchell picked up the document on 2 May 2017.
[56] Mr Burchell disputes that Ms Delpech in fact sent the documents by Courier Post to the address because he made enquiries with the Post Shop, who indicated that no such documents had arrived. In relation to Ms Taylor’s affidavit, he appears to accept that the documents were sent but that they were late in arriving, only on or about 2 May 2017.
[57] In the resolving this issue, I prefer the affidavit evidence provided by Ms Delpech and Ms Taylor. I have no reason to suspect that Ms Delpech would be untruthful about such a mundane matter. While it may be that the Post Shop office did not receive the documents, I am not prepared to doubt Ms Delpech’s honesty based on a bare allegation by Mr Burchell.
[58] As to the filing and service of authorities and submissions, I am satisfied by the evidence of Ms Taylor that the documents were left at the Post Shop on Monday 1 May 2017. This may in fact, however, have been slightly out of time, given the requirement to file three working days in advance of the hearing. In any event, I
granted Mr Burchell two weeks to file written submissions in response. To my mind, this deals with any potential disadvantage to him.
Orders
[59]Mr Burchell’s statement of claim is struck out.
[60] The application for costs in relation to the vesting of Mr Burchell’s motorcycles is dismissed.
Costs
[61] Memoranda as to costs, no longer than three pages in length, may be filed if necessary.
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